Evening Headlines
Bloomberg:
- Bonds at Risk as Moody's, S&P Poised to Lower Credit Ratings: Euro Credit. Europe’s most-indebted countries are vulnerable to additional rating cuts driving up their borrowing costs, which may pressure policy makers to muster a more aggressive response to the region’s debt crisis. “To say that we are at the bottom of credit ratings cycle, by implication one will have to believe that the deleveraging process has come to an end,” said Peter Geikie-Cobb, who helps manage about $6.5 billion at Thames River Capital U.K. Ltd. in London. “I don’t think that’s the case.” Fitch Ratings cut Greece to BB+ on Jan. 14, joining Standard & Poor’s and Moody’s Investors Service in bestowing junk status on the country’s debt. Moody’s began reviewing Portugal and Spain in December after S&P started its three-month clock on whether to downgrade Spanish debt. The European Union’s so-called peripheral countries have seen their creditworthiness evaporate as surging budget deficits and slumping economic growth boosted debt. The bailouts of Greece and Ireland have focused investor scrutiny on other high- deficit countries such as Portugal, Spain and Belgium. “The risks of ratings changes in the next few months are high, and the rather more Pavlovian reaction of short-term trading books will indeed be sensitive to such changes,” said Marc Ostwald, a strategist with Monument Securities in London. A wave of ratings downgrades could begin within weeks.
- House Approves Repeal of Obama's Health-Care Reform Law. The U.S. House of Representatives voted to repeal President Barack Obama’s health-care overhaul as Republicans delivered on campaign promises to reopen debate on the issue and attempt to reshape the law. The measure passed 245-189, with all of the House’s 242 Republicans joined by three Democrats to support overturning the measure signed into law by Obama last March. “Repeal means keeping a promise,” said House Speaker John Boehner in a speech on the House floor. “This is what we said we would do.” The House action officially re-ignited a debate that consumed Congress during much of Obama’s first two years in office and is likely to be a prime topic during the 2012 presidential campaign. “This ain’t repealing nothing,” said Representative Charles Rangel, a New York Democrat, on the House floor. “This is the political theater part of it.” House Majority Leader Eric Cantor, a Virginia Republican, told reporters today that “the American people deserve to see a vote in the Senate.” Senate Minority Leader Mitch McConnell, a Kentucky Republican, said he will push for one. Cantor said the repeal vote will be followed tomorrow by a vote instructing House committees “to begin work to construct an alternative health-care vision” that will be “our so-called replacement bill.” During debate today, Republicans said their plan would include many provisions that Democrats touted in the existing law, including allowing young adults to stay on their parents’ insurance plans up to age 26 and barring insurers from rejecting coverage for people based on pre-existing conditions. Boehner, an Ohio Republican, told reporters that a replacement plan would aim to “bring down the cost of health insurance for the American people and expand access.” As they work on their proposals, Republicans plan to use the House Appropriations Committee to stymie Obama’s overhaul measure, mainly by denying money for implementing some of its provisions. Forty-six percent of Americans think the health care law is likely to cut jobs, 54 percent think it will hurt the economy, and 62 percent see it as increasing the federal deficit, according to a poll conducted Jan. 13-16 by ABC News and the Washington Post. Republicans, who call the law “Obamacare,” contend it will raise taxes, destroy jobs and burden businesses with new requirements such as one that makes them report to the Internal Revenue Service any expenditure over $600. “Let’s stop payment on this check before it can destroy more jobs and put us in a deeper hole,” Boehner said in his floor speech. Representative Michele Bachmann, a Minnesota Republican, termed the overhaul measure “the crown jewel of socialism; it is socialized medicine.” The three Democratic lawmakers voting for repeal were Dan Boren of Oklahoma, Mike McIntyre of North Carolina and Mike Ross of Arkansas.
- Global Bond Growth Rate Decelerates to Pre-Crisis Levels: Credit Markets. The growth in bonds outstanding globally is slowing for the first time since 2005 as governments withdraw their support while credit markets heal.
- Fed Creates Diversity, Inclusion Offices at Board, 12 Banks. The Federal Reserve is establishing offices to promote diversity at the central bank’s Washington- based board and 12 regional banks as required by a law overhauling financial regulation enacted last year. The Office of Diversity and Inclusion will also develop standards to assess the practices of entities regulated by the Fed, the central bank said in a statement today. Sheila Clark, who has overseen the Equal Employment Opportunity programs at the Fed board, was named program director.
- Health Journals May Force Scientists to Report Hedge Fund Ties to Research. The New England Journal of Medicine and 13 other research publications may force scientists who submit studies to disclose payments from hedge funds in the wake of insider-trading probes involving a drugmaker and technology companies. Editors for the New England Journal, the Journal of the American Medical Association and 12 other periodicals will discuss during their annual meeting in June whether researchers must reveal investment-industry ties, said Karen Buckley, a New England Journal spokeswoman. Existing rules on payments by drugmakers and device companies don’t cover arrangements with investors, Buckley said in a phone interview.
- High-Frequency Traders May Accept More Risk, Liquidnet Says. Some high-frequency trading firms will transact blocks of shares away from exchanges as pending regulations restrict some of their activities, according to analyst Vlad Khandros at Liquidnet Holdings Inc. The prediction was 1 of 11 that Khandros, a market- structure and public-policy analyst, sent to some of New York- based Liquidnet’s 630 mutual fund and hedge fund clients today. He also said high-frequency trading, in which firms may transact thousands of times a second, will become an “accepted and defined” category of market participants this year.
- Bankrupt Vallejo May Repay Its Creditors as Little as 5% of Claims. The city of Vallejo, California, proposed paying some creditors as little as 5 percent of what they are owed, making it the first general municipality that would fail to fully repay its debts in bankruptcy. General unsecured creditors would collect 5 percent to 20 percent of their claims under the plan of adjustment filed late yesterday in U.S. Bankruptcy Court in Sacramento, the state capital. No city or county has used federal bankruptcy laws to force creditors to take less than they are owed, according to Bruce Bennett, the lead lawyer for Orange County, California, when it filed the biggest municipal bankruptcy in the U.S. in 1994. Vallejo’s plan assumes the city can’t provide essential services, like police and fire protection, while also paying its debts, he said. Should the city succeed, the case “may become an important precedent,” Bennett said in an interview.
- Finra's Ketchum Says Brokers Likely to Face Fiduciary Standard. The Financial Industry Regulatory Authority’s top executive said federal regulators are “very likely” to force U.S. brokers to meet stricter requirements for acting in the best interests of their clients. The Securities and Exchange Commission may force brokers who give personalized advice to adopt the fiduciary standard applied to investment advisers, Finra Chief Executive Officer Richard Ketchum said today at a securities law conference in Coronado, California.
- Obama Dinner Menu Includes Maine Lobster, Rib Eye and Apple Pie. The guests invited to President Barack Obama’s state dinner in honor of Chinese President Hu Jintao will be served a “quintessentially American” meal, including “old fashioned apple pie with vanilla ice cream,” according to the menu released by the White House. The main course for the third state dinner hosted by the president and Michelle Obama will feature poached Maine lobster, dry aged rib eye with double stuffed potatoes and creamed spinach. Among the 225 invited guests are actor Jackie Chan, Jamie Dimon, chief executive officer of JPMorgan Chase & Co.(JPM), Walt Disney Co.(DIS) CEO Robert Iger and former Presidents Jimmy Carter and Bill Clinton.
- Daley Files to Sell $8.3 Million JPMorgan(JPM) Shares After Joining Obama Team. William Daley, President Barack Obama’s new chief of staff, filed a notice with the Securities and Exchange Commission today to sell 186,190 shares of JPMorgan Chase & Co. that he valued at almost $8.3 million. The approximate date of sale was listed in the filing as today and comes as Daley, a former JPMorgan executive, divests his holdings to work at the White House.
- Godrej Raises Prices for Third Time in Three Months as Indian Costs Surge. Godrej Consumer Products Ltd., India’s second-largest maker of bath soap, will raise prices for a third time in as many months to offset raw material costs that have climbed 50 percent since April. “We are facing an abnormal scenario in raw material prices,” Managing Director A. Mahendran said in a Jan. 18 interview. Godrej Consumer, controlled by billionaire Adi Godrej, plans to raise prices of soap and hair color by as much as five percent, Mahendran said at its Mumbai headquarters.
- Spain to Ramp Up Bailout of Banks. Spain plans to pour billions more euros into its troubled savings banks and force them to be more open about their lending practices, people familiar with the matter said, an acknowledgment that previous efforts to fix the banks have fallen flat as the country seeks to ward off an international bailout. In a first step, Spain is preparing to issue €3 billion ($4 billion) in debt in coming days, the people familiar with the matter said. Government officials are putting plans in place to eventually raise as much as €30 billion, according to these people, though some say the final tally will be less. The hope is that a series of capital injections will quell investor jitters about the savings banks, known as cajas (literally, "boxes"), which have been a thorn in Spain's side as it seeks to convince investors that the country's finances are stable. The fate of the cajas is inextricably tied to the fate of Spain and potentially to the euro itself. Fear that the savings banks can't raise funds on their own and will need a government bailout was one reason ratings agency Moody's put Spain's rating on review for a downgrade last month.
- China's rare-earth exports dropped 9.3% to 39,813 metric tons last year, underscoring the government's tight grip on the specialized metals, citing data from China Customs Statistics Information Center.
- Rivals Seek New Balance. Obama, Hu Emphasize Common Ground, Gloss Over Lasting Disputes at Summit. U.S. President Barack Obama and Chinese President Hu Jintao, seeking a steadier footing for the often-troubled U.S.-China relationship, played up the two nations' common interests—and soft-pedaled or ignored longstanding issues that divide them.
- The iPad Now Can Take Command of Computers by Walt Mossberg. What about remotely controlling a PC or Mac from the newest category of digital device, a multitouch tablet? Well, it turns out there are apps for that.
- Goldman(GS) Profit is Pinched by New Rules. Goldman Sachs Group Inc.'s profit slide of 52% in the fourth quarter showed the securities giant's size and swagger aren't enough for it to escape the tightening squeeze of a regulatory overhaul and jittery clients and investors.
- As Food Prices Soar, Eateries Scramble. Soaring global food prices, particularly for meat, sugar and coffee, are putting pressure on the restaurant, travel and hotel sectors as they pursue a fragile recovery. In a bid to offset added costs without passing them on to price-sensitive consumers, many companies are scrambling to renegotiate contracts, find cheaper suppliers and reconfigure menus. Increased demand and market speculation, as well as bad weather like the recent flooding in Australia, have driven up prices for items ranging from coffee beans to beef.
- The Union Threat to the Democrats' Future by Douglas E. Schoen. Unless the party confronts its allies in the public-employee unions, it will continue to lose credibility with voters around the country. There is a crisis in state and municipal finance. That much is clear. What hasn't been fully understood is that the fate of the Democratic Party is bound up in the resolution of that crisis.
- The Repeal Vote. Democrats are deriding last night's House vote to repeal ObamaCare as "symbolic," and it was, but that is not the same as meaningless. The stunning political reality is that a new entitlement that was supposed to be a landmark of liberal governance has been repudiated by a majority of one chamber of Congress only 10 months after it passed. This sort of thing never happens. More House Members—245 in total—voted to rescind the new entitlement than the 219 Democrats who voted to create it last March. That partisan majority narrowly prevailed over all 178 Republicans and some 38 Democrats. The three Democrats who favored repeal yesterday confirmed the bipartisan opposition to the kind of vast new social program that historically has been built on a national bipartisan consensus.
- China's Sizzling End to 2010 Calls for More Tightening.
- Seagate(STX) Profit and Sales Fall Sharply; Shares Skid. Seagate Technology reported sharply lower profit on Wednesday as sales of its computer hard drives and storage devices fell and it recorded restructuring costs as it gears up for a massive share buyback after the failure of a private equity takeover deal.
- Dennis Gartman: Reversal of Consequence Upon Us.
Forbes:
- Goldman(GS) CEO Talks Shop With China's President. On the same day Goldman Sachs reported a 53% drop in earnings its CEO Lloyd Blankfein was chatting it up with President Obama and China’s President Hu Jintao.
- Private Equity Warming to For-Profit Colleges; Hurdles Remain. Private-equity firms are showing some renewed interest in operators of for-profit colleges, though deal activity still may not pick up until regulatory clouds begin to clear later this year.
USA Today:
- Airfares Rise Along With Oil Costs.
- Skyscraper Building Boom Driven By China. China is building 44% of the 50 skyscrapers to be completed worldwide in the next six years, increasing the number of skyscrapers in Chinese cities by over 50%, says Andrew Lawrence, an Asian property analyst at investment bank Barclays Capital.
Reuters:
- EBay(EBAY) Outlook Beats Street as Turnaround Bears Fruit. Online marketplace eBay Inc provided investors with a bullish 2011 profit outlook after the holiday quarter showed signs it is delivering a promised turnaround, as improvements in its buyer experience helped boost sales at its marketplaces unit. Its shares rose 2.4 percent after hours.
- F5 Networks(FFIV) Weak Q2 Revenue View Drags Down Sector. F5 Networks forecast weak second-quarter revenue, knocking down network equipment stocks on concerns that the market for managing the explosion in Internet traffic may not be growing as fast as expected. Shares of F5 Networks, which has outperformed market expectations for the past seven quarters, plunged 23 percent after the company forecast lower-than-expected revenue for the January-March quarter.
- Plexus(PLXS) Warns of Sequential Fall in Q3 Revenue; Shares Down. Plexus Corp warned of sequential decline in third-quarter revenue and a "significant" production delay for its customer Coca-Cola Co, sending the electronics manufacturing services company's shares down 10 percent in after-market trade.
Telegraph:
- US Trader Hetco Drives Up Oil Price. An American trading group reportedly building up a "huge" physical position in North Sea oil has driven London Brent prices above $98 a barrel. Hetco, which is part-owned by US oil and gas group Hess Corp, was said to have taken control of eight North Sea Forties oil shipments and two Brent cargoes – and it is believed to be in the market for more. The move would give Hetco more influence over the price of oil for immediate delivery.
- Brazil Slams Brakes to Curb Inflation, Risking Hot Money Tsunami. Brazil has raised interest rates sharply, following China, India and host of countries across the emerging world in acting to curb inflation and counter the flood of dollar liquidity from the US. Alexandre Tombini, the new head of Brazil’s hawkish central bank, kicked off his tenure by raising the key Selic rate a half point to 11.25pc, despite fears that this will push the over-valued real to extreme levels.
- Goldman Sachs £9.6bn pay and bonuses to rouse tensions with City. Goldman Sachs' staff have been handed a compensation pot worth $430,000 (£269,000) per employee in a payout that is likely to once again stir tensions between the City and the rest of the UK.
- Leaks Force RIM(RIMM) to Break Talks with India. Canada-based Research in Motion , the maker of BlackBerry smartphones, has temporarily suspended its dialogue with the government on security issues saying leakage of sensitive discussions between the company and the Indian authorities had undermined the confidence needed for such talks. Endorsing RIM’s stance, Canada has complained to Home Secretary GK Pillai that confidential information submitted by the smartphone company was being leaked to the media, and a top executive from the cellphone company would visit New Delhi and assess the situation (on the leaks) before talks resume.
- China's policies towards protecting intellectual property rights should not be labeled "protectionist" as the country seeks to prevent monopolies on technology by foreign companies, Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation affiliated with the Ministry of Commerce, wrote.
- China will continue to diversify its foreign exchange investments from U.S. Treasuries in a bid to control risk, citing Zhang Monan, a researcher with the State Information Center.
Citigroup:
- Reiterated Buy on (MRO), raised target to $50.
- Asian equity indices are -1.25% to -.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 111.0 +3.5 basis points.
- Asia Pacific Sovereign CDS Index 113.0 +.5 basis point.
- S&P 500 futures +.07%.
- NASDAQ 100 futures +.08%.
Earnings of Note
Company/Estimate
- (ESI)/3.12
- (JCI)/.54
- (UNH)/.85
- (FCX)/2.98
- (FCS)/.39
- (PPG)/1.12
- (PH)/1.29
- (PGR)/.36
- (MS)/.28
- (COL)/.88
- (MI)/-.24
- (COF)/1.37
- (ISRG)/2.25
- (GOOG)/8.08
- (MXIM)/.41
- (AMD)/.11
- (LUV)/.15
- (PNC)/1.36
- (IGT)/.20
- (UNP)/1.48
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 420K versus 445K the prior week.
- Continuing Claims are estimated to rise to 3985K versus 3879K prior.
- Existing Home Sales for December are estimated to rise to 4.87M versus 4.68M in November.
- Leading Indicators for December are estimated to rise +.6% versus a +1.1% gain in November.
- Philly Fed for January is estimated at 20.8 versus 20.8 in December.
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -500,000 barrels versus a -2,154,000 barrel decline the prior week. Distillate supplies are expected to rise by +1,000,000 barrels versus a+2,652,000 barrel gain the prior week. Gasoline inventories are expected to rise by +2,500,000 barrels versus a +5,081,000 barrel gain the prior week. Finally, Refinery Utilization is expected to rise by -.5% versus a -1.6% decline the prior week.
- (TEF) 3-for-1
- The $13 Bln 10-Year TIPS Auction, (SE) analyst meeting and the (WGL) analyst meeting could also impact trading today.
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