Wednesday Watch

Late-Night Headlines
Bloomberg:

- President Barack Obama said he’s adding more money for education in his budget to improve test scores and help students succeed in an increasingly competitive global economy. Obama said he’s proposing putting $1.35 billion in his fiscal 2011 budget to expand the so-called Race to the Top program, in which states compete for grants by embracing Obama’s education agenda.

- Al-Qaeda may be training U.S. citizens in Yemen to conduct terrorist attacks, the Senate Foreign Relations Committee said in a report issued before a hearing on the country set for tomorrow. Some in a group of 36 convicted American criminals who arrived in Yemen in the past year, saying they were studying Arabic, have disappeared and may have gone to al-Qaeda training camps in ungoverned parts of the country, according to the report issued by Senator John Kerry, the Massachusetts Democrat who chairs the committee. Findings were based on interviews by committee staff with law-enforcement and intelligence officials.

- The euro fell to the lowest level in almost four weeks against the dollar as Germany’s investor confidence slid more than estimated and Europe’s finance chiefs said Greece may have to do more to contain its budget crisis.

Wall Street Journal:

- A little-known Republican upended the balance of power in Washington by winning a U.S. Senate seat in Massachusetts, a result that imperils President Barack Obama's top legislative priorities and augurs trouble for his party in this year's elections. With 75% of the vote counted, Republican Scott Brown was leading his opponent, Massachusetts' Democratic Attorney General Martha Coakley 52.7% to 46.3%, according to the Associated Press, which declared Mr. Brown the winner.

- Democrats' loss in Tuesday's race for a Massachusetts Senate seat is a stark illustration of their collapsing support from independent voters, a phenomenon that's prompting party leaders to revamp their playbook for this year's midterm elections. Independent voters—typically centrist, white and working-class—backed President Barack Obama and the Democrats in 2008. But Massachusetts is now the third Obama-won state in the past three months where independents have swung decisively Republican.

- After months of wrangling, the city council tentatively passed an ordinance to regulate the hundreds of medical marijuana dispensaries that have popped up here in the absence of municipal restrictions. The new law, which is expected to get final approval next week, would sharply limit the number of dispensaries to no more than about 137, with the aim of eventually getting the number down to 70. The city has no exact count for how many dispensaries are operating currently, but several hundred are estimated to be exist.

- The Federal Housing Administration will announce more stringent lending requirements on Wednesday to cushion against rising defaults and to stave off the need for a possible taxpayer bailout.

- More federal judges are showing leniency toward individuals who view child pornography but who aren't themselves molesters, according to recent data on prison sentences.

- New Wave of Warlords Bedevils US.

- The majority party normally loses seats in midterm elections, but the Republican resurgence of recent months is more than a conventional midterm rebound. How can a little known Republican run a competitive Senate campaign in Massachusetts? The culprit is the unpopularity of health reform, and it means that Democrats will face even worse problems later this year in less liberal places than Massachusetts.

- Virtual Dashboards: The Next Must-Have? Your iPhone operates by the touch of your fingers. Why not your car?

MarketWatch.com:

- Samsung Electronics will pay Rambus Inc. $700 million over five years, and invest another $200 million in the chip design company as part of a settlement ending their legal disputes, the two companies said Tuesday. Shares of Rambus (RMBS) jumped more than 12% in after-hours trading, later paring some gains but still up by more than 8%.

CNBC:

- President Obama and his Democratic Party have declined considerably in popularity in the year since he took office, weighed down by public discontent over the economy and the health care debate in Congress, according to a new NBC News/Wall Street Journal poll.

IBD:
- Taleo Corp. (TLEO) software is at the heart of corporate job Web sites that sift through applicant resumes to recruit new hires. With unemployment stuck at a disturbingly high 10%, this would not seem to be the time to tie your fortunes to corporate hiring. But Taleo has managed to grow and expand its business.

NY Times:

- The world's economy is recovering more strongly than expected and the projected growth rate in 2010 is likely to beat the forecast 3 percent, Dominique Strauss-Kahn, the head of the International Monetary Fund, said on Wednesday.

CNNMoney.com:

- One week after the devastating earthquake struck near Haiti's capital, donations for relief efforts are still pouring in -- in excess of $220 million. Charities, companies, individuals and celebrities across the U.S. have been rallying together in the aftermath of the 7.0-magnitude quake last Tuesday, and their efforts are paying off.

Business Insider:

- More kids are getting mobile phones: Last year, more than 35% of U.S. children ages 10-11 had cellphones, almost double the amount in 2005, according to Mediamark data, via eMarketer. And even more than 5% of 6-7-year-olds had cellphones last year. Takeaway: The audience for kids-focused mobile content, apps, and advertising is growing rapidly.

Business Week:

- BHP Billiton Ltd.(BHP), Australia’s biggest oil and gas producer, boosted its forecast for petroleum exploration spending by 33 percent because of an increase in drilling in the U.S. Gulf of Mexico and offshore Australia. BHP, also the world’s largest mining company, expects to spend $800 million on oil and gas exploration in the year ending June 30, $200 million more than previously projected, the Melbourne-based company said in a statement today. “The reality of higher oil prices has reinforced the need to crank up exploration spending,” Gavin Wendt, a resources analyst at Mine Life Pty, said by phone from Sydney. “Companies now have the confidence to go out and spend the money.”

Politico:

- The Coakley campaign is bridling at finger-pointing from the White House and Washington Democrats, and an outside adviser to the campaign has provided to POLITICO a memo aimed at rebutting the charge that Coakley failed and making the case that national Democrats failed her. The adviser, who made the case to my colleague Jonathan Martin on the condition of anonymity in response, he said, to "the current leaking coming out of the White House and the DNC that is chalking all of this up to a “bad candidate”. The adviser, who cited internal polling numbers to make the case, e-mails that, "There’s more to the story than that. If Martha is guilty of taking the race for granted, so is the White House and the DNC."

- Speaker Nancy Pelosi (D-Calif) said Tuesday that House Democrats are still "right on course" with the health care reform bill, regardless of what happens in the Massachusetts special election—and that she has not been pressured by the White House to simply accept the Senate bill if GOP candidate Scott Brown wins.

Rasmussen Reports:

- Republican candidates still hold an eight-point lead over Democrats in the latest edition of the Generic Congressional Ballot. The latest national telephone survey shows that 45% would vote for their district’s Republican congressional candidate while 37% would opt for his or her Democratic opponent.

- Rasmussen Reports has conducted an Election Night survey of 1,000 voters in the Massachusetts special election for U.S. Senate. Data will be released on this page throughout the evening. · 78% of Brown voters Strongly Oppose the health care legislation before Congress. · 52% of Coakley supporters Strongly Favor the health care plan. Another 41% Somewhat Favor the legislation. · 61% of Brown voters say deficit reduction is more important than health care reform. · 46% of Coakley voters say health care legislation more important than deficit reduction. · 86% of Coakley voters say it’s better to pass the bill before Congress rather than nothing at all. · 88% of Brown voters say it’s better to pass nothing at all.

Real Clear Politics:

- Analysis: Democrats' health care quest has soured.

Reuters:

- Q+A-What the Massachusetts upset means to Obama agenda.

- IBM (IBM) raised its 2010 profit target and reported a stronger-than-expected, 9 percent increase in fourth-quarter earnings, as cost cuts and a shift to more profitable contracts helped it weather a slump in corporate spending. IBM's share price fell 2 percent after the results, however, as the results failed to encourage more buying in the shares which already rallied nearly 60 percent in the past year.

- Cree Inc (CREE), which makes light emitting diode (LED) fixtures, said on Tuesday that second-quarter profit more than tripled and topped Wall Street estimates, sending the company's shares up 10 percent in extended trade.

- Six Republican senators took aim at the Obama administration's Christmas eve decision to give mortgage companies Fannie Mae (FNM) and Freddie Mac (FRE) unlimited access to a Treasury credit line. The senators called on Senate Banking Committee Chairman Chris Dodd to hold public hearings and scrutinize the decision to turn the government-sponsored enterprises into "public utilities."The current status of the GSEs is untenable ... and we feel that it would be irresponsible for the committee to fail to investigate Treasury's drastic action with regard to what could be the next chapter in our financial crisis," Senator Jim DeMint of South Carolina wrote to Dodd, a Connecticut Democrat who recently announced his decision not to seek re-election in November.

Financial Times:

- Bank of China is emerging as one of the largest non-US banks investing in the troubled US commercial property sector, and its local bankers are scouring the market for new deals. With most US banks paralyzed and the market for commercial mortgage-backed securities frozen, foreign banks are now providing more than 60 per cent of all debt financing for commercial real estate, according to data from CB Richard Ellis.

- Debit card spending is on track to overtake cash as a payment method in the UK this year, according to Visa Europe, the card processor.

TimesOnline:
- Roof-mounted wind turbines and solar panels are “eco-bling” that allow their owners to flaunt their green credentials but contribute very little towards meeting Britain’s carbon reduction targets, according to the Royal Academy of Engineering. Developers will waste millions of pounds installing such micro-generation devices unless the Government revises its building regulations on carbon-neutral homes and offices.

The Economic Times:

- More than 4.2 billion dollars was spent on mobile phone applications last year with Apple grabbing over 99 percent of the growing market, according to research firm Gartner. Apple accounted for at least 99.4 percent of the 2.516 billion downloads of the mini-programs for smartphones last year, Gartner said. Gartner put revenue from mobile phone applications at 4.24 billion dollars in 2009 and predicted it would rise to 6.8 billion dollars this year and 29.5 billion dollars by 2013.

Evening Recommendations

Citigroup:

- Reiterated Buy on (GOOG), target $640.

- Rated (OMC) Buy, target $47.

Night Trading
Asian indices are -.75% to +.25% on avg.

Asia Ex-Japan Inv Grade CDS Index 95.0 +1.0 basis point.
S&P 500 futures -.16%.
NASDAQ 100 futures -.17%.

Morning Preview
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Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

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Briefing.com In Play

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Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/Estimate
- (STT)/.99

- (USB)/.29

- (PGR)/.37

- (BK)/.52

- (BAC)/-.52

- (COH)/.72

- (EAT)/.22

- (WFC)/.00

- (MS)/.41

- (JEF)/.36

- (FFIV)/.49

- (EBAY)/.40

- (XLNX)/.34

- (NVEC)/.54

- (SBUX)/.27

- (AMR)/-1.21

- (KMP)/.49

Economic Releases

8:30 am EST

- The Producer Price Index for December is estimated unch. versus a +1.8% gain in November.

- The PPI Ex Food & Energy for December is expected to rise +.1% versus a +.5% gain in November.

- Housing Starts for December are estimated to rise to 572K versus 574K in November.

- Building Permits for December are estimated to fall to 580K versus 589K in November.

Upcoming Splits

- None of note

Other Potential Market Movers
- The Fed's Dudley speaking, weekly API energy inventory report, weekly MBA mortgage applications report and the (SPW) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are slightly lower, weighed down by financial and industrial stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.