Evening Headlines
Bloomberg:
- Long Bonds Rejected as Yield Curve Steepens: Credit Markets. U.S. companies are selling the fewest long-maturity bonds in almost two years as a strengthening economy diminishes investors’ appetite for the debt. CenterPoint Energy Inc. and Enterprise Products Partners LP are the only issuers of 30-year bonds this month, raising a combined $1.05 billion amid $64.4 billion of overall sales, according to data compiled by Bloomberg. Last month, $1.5 billion of debt maturing in at least three decades was sold, down 85 percent from a year earlier and the least since April 2009.
- Covered Bond Sales Deluge Drives Bank Funding Costs to Record: Euro Credit. Investors are demanding record yield premiums to buy European covered bonds, driving up funding costs for banks at a time when they are relying more than ever on the top-rated, loan backed securities as a source of capital. The extra interest investors demand to own the debt has doubled since the end of 2009 and reached a record 202 basis points this month, according to Barclays Capital’s Euro- Aggregate Securities - Covered Index. Spreads on bonds sold by banks in so-called peripheral nations, which account for 38 percent of the Barclays gauge, widened the most in the region.
- Spain's Collapse May Signal the End of Euro, Nobel Winner Pissarides Says. The European Union doesn’t have the resources to rescue Spain if it “collapses,” Nobel Prize- winning economist Christopher Pissarides said at a forum in Beijing today. That may lead to the end of the euro, said Pissarides, who teaches at the London School of Economics.
- Short Selling Against S&P 500 Drops to One-Year Low, Exchange Data Show. Bets against the Standard & Poor’s 500 Index fell to a one-year low as short sellers reduced speculation that technology and telephone stocks such as Adobe Inc. and CenturyLink Inc. will decline. Short interest on the S&P 500 dropped to 6.87 billion shares, or 3.9 percent of shares available for trading, as of Dec. 31, down 5.7 percent from two weeks earlier, according to data compiled by U.S. exchanges and Bloomberg. It was the third straight period that S&P 500 short selling fell. For technology companies, it slid 8.1 percent to 1.26 billion shares, and it fell 16 percent to 368.4 million for phone stocks.
- Cliffs(CLF) to Buy Consolidated Thompson for C$4.9 Billion. Cliffs Natural Resources Inc., North America’s largest iron-ore producer, agreed to buy Consolidated Thompson Iron Mines Ltd. for about C$4.9 billion ($4.95 billion) to add Canadian output. Cliffs will pay C$17.25 a share, the Cleveland-based company said today in a statement. The bid is 29 percent higher than today’s Consolidated Thompson closing share price on the Toronto Stock Exchange. The purchase price includes net debt.
- Merck(MRK) Vaccine Reduces Risk of Shingles by 55% in Kaiser Permanente Study.
- Daley Has $7.7 Million in JPMorgan(JPM) Stock on Way to White House. William Daley will have about $7.7 million worth of JPMorgan Chase & Co. shares to divest when he takes over as President Barack Obama’s new chief of staff, according to administration officials and regulatory filings. White House lawyers also are reviewing whether Daley will have to recuse himself from some White House discussions to avoid potential conflicts stemming from his prior job as vice chairman of JPMorgan and memberships on the boards of Abbott Laboratories and Boeing Co., according to an administration official. Daley held 114,414 JPMorgan shares when his selection as chief of staff was announced by Obama on Jan. 6, according to a filing with the Securities and Exchange Commission. On that day, New York-based JPMorgan also said he could retain 101,913 restricted shares and stock appreciation rights that entitled Daley to buy another 100,000 shares at $34.78 each.
- Apollo Group Put Trading Backfires in Biggest Loss of U.S. Options Market. Options traders who piled into bearish bets against Apollo Group Inc. before the largest for- profit college operator’s quarterly report had today’s biggest loss in the U.S. market as the shares soared. Apollo, the Phoenix-based operator of the University of Phoenix, jumped 13 percent to $40.74 as of 4 p.m. in New York after reporting quarterly results that were higher than analysts estimated. Trading of puts to sell the stock jumped to a 12-week high of 42,316 contracts yesterday as investors purchased contracts to hedge against stock losses or bet on a drop. Apollo’s January $36 puts plunged 96.2 percent to 7 cents today for the biggest retreat among all contracts traded on U.S. exchanges, according to Bloomberg data. Yesterday’s most-traded options, the January $34 puts, fell 96.1 percent to 4 cents for the second-biggest loss. Apollo puts accounted for eight of the 10 biggest losses among U.S. options.
- Liberty Mutual Reduces Muni-Debt Holdings in 3 U.S. States, CEO Kelly Says. Holding Co., the policyholder-owned insurer, reduced its holdings of municipal debt in Connecticut, and Illinois.Liberty MutualCalifornia “The market is being held up to some extent by the belief that the federal government will bail out” state and local issuers, Chief Executive Officer Edmund “Ted’’ Kelly said today in an interview on the sidelines of a conference in New York. The insurer still has holdings in each of the states, he said.
- Propane, Ethane Price Gains Deepen Natural Gas Supply Glut: Energy Markets. Rising prices for natural gas byproducts such as propane, which touched an 11-month high this week, are encouraging energy companies to boost gas output even after the market’s biggest annual slide since 2008. Propane, a liquid used in home heating and outdoor grills, has surged 42 percent since reaching last year’s low on July 12. Ethane, used as a feedstock in the production of plastics, has climbed 40 percent from a 2010 low on June 23. Profits from liquids are encouraging U.S. companies to shift to fields where they are more abundant, boosting natural gas production at the same time.
- New York, U.S. Northeast Get Ready as Another Snowstorm Moves In. Cities across the U.S. Northeast deployed thousands of plows and sand-spreaders as the second major snowstorm in a little more than two weeks threatened to cripple air, road and train travel.
- Brisbane's Flood Waters Rise, Shutting Australian City, Isolating Suburbs. Flooding in Brisbane is intensifying, cutting off roads and closing businesses as Australia’s third- largest city faces its worst deluge since 1893. Brisbane River, which flows through the center of the city, will surge to 4.5 meters (15 feet) at 3 p.m. local time, from a current level of 3.1 meters. The river may tomorrow exceed 5.45 meters, the height that devastated the city during flooding in 1974, the Bureau of Meteorology said on its website. More than 75 percent of Queensland state, an area bigger than Texas and California combined, has been declared a disaster zone as torrential rain triggered flash floods on Jan. 10 that left 10 dead and more than 90 people missing.
- Giffords's Outlook Improves. U.S. Rep. Gabrielle Giffords remained in critical condition after brain surgery, but doctors said Tuesday that she would survive Saturday's shooting. "She has a 101% chance of survival," said Peter Rhee, head of the University of Arizona Medical Center's trauma unit, where Ms. Giffords was brought after being shot in the head at point-blank range while meeting constituents near a Tucson supermarket. Ms. Giffords has shown some slight movement on one side of her body, and there are signs she could open her eyes soon, Dr. Rhee said.
- Southern Copper Chairman Unloads Shares. Southern Copper Corp. Chairman German Larrea Mota-Velasco sold 400,000 shares for about $19.5 million in recent weeks in a sign the shares may be overvalued even as the near-term outlook for copper pricing looks promising. Mr. Larrea sold the shares at $48.51 to $49.90 a share.
- Obama Begins Gearing Up Re-Election Bid. Democratic Officials Say Early Start Is Needed in Part to Commence Fund-Raising for Contest Expected to Cost $1 Billion.
- Goldman(GS) Bankers, Ascendant Again. In Rules Revamp, Investment Staff Is Set to Gain Ground on Traders Tied to Firm's Recent Troubles.
- New Names Are Moving Up the CMBS Charts. After Downturn, Some—Like Former No. 1 Morgan Stanley(MS)—Are Late to Rejoin Market; Concern Over Loan Standards. As the market for commercial-mortgage-backed securities begins to thaw from a two-year deep freeze, a new pecking order among underwriters is emerging, with J.P. Morgan Chase & Co.(JPM) as the dominant player and onetime market leader Morgan Stanley not yet on the boards. The landscape for CMBS has changed drastically since its peak in 2007—when banks churned out $230 billion of loans nationally and underwriters raked in hundreds of millions of dollars in fees.
- Lululemon(LULU) Boosts 4Q Guidance On Strong Revenue Performance. Yoga-wear retailer Lululemon Athletica Inc. (LULU) is again exceeding quarterly expectations, significantly boosting its fourth-quarter outlook on stronger-than-expected revenue. The Vancouver-based company said it now projects earnings of 55-57 cents a share for the fiscal quarter that ends Jan. 30. That compares with the Thomson Reuters mean estimate for earnings of 50 cents a share and is well above the company's own projection for fourth-quarter earnings of 46-48 cents. Lululemon said net revenue for the quarter should range from $237 million to $239 million, well above the analyst estimate of $221 million and up from its previous view of $210 million to $215 million. Net revenue in the same quarter a year earlier was $161 million. Lululemon closed Tuesday on Nasdaq at $67.24, down 1.8%. In after-hours trading, it's up 6.7% to $71.80.
- New Move to Make Yuan a Global Currency. China has launched trading in its currency in the U.S. for the first time, an explicit endorsement by Beijing of the fast-growing market in the yuan and a significant step in the country's plan to foster global trading in its currency.
- Time to Dip a Toe in Housing?
- Pros: Commodities Bull May Be About to Stumble?
- US Senate Report to Criticize Goldman(GS). Goldman Sachs will come in for harsh criticism from an influential US Senate report into the financial crisis that will highlight alleged conflicts of interests in the bank’s dealings with clients, according to people familiar with the matter.
- Australia Coal Losses Mount as Floods Persist. Australia's devastating floods could remove 5 percent or more of steelmaking coal from world markets, a major bank estimated on Wednesday, as signs emerged that damage and disruption to coal infrastructure continued to spread with the floodwaters.
Business Insider:
- Illinois Passes A Huge 66% Tax Hike, And Governors Around the Country Are Making Fun Of It. Poor Illinois. It's taken over the mantle as the state that everyone thinks is the most screwed. Faced with a monster budget gap, the state Senate just passed a monster 66% hike in the state income tax. The news has governors or other states gleeful. Indiana Governor Mitch Daniels said today that the tax hike was good for... Indiana. And during his State of the State address, New Jersey governor Chris Christie held up Illinois as a state that was going in the wrong direction. Chicago readers, any plans to move?
- Deep Dive Into The Federal Government's Budget and the History of US National Debt. (graphs)
- PHOTOS: Surging Food Prices Are Sparking Riots All Around The World.
- Goldman(GS) Prop: A Veritable (Physical) Gold Mine... As Suspected.
- Is The Criminal Case Against Goldman(GS) About to Be Reopened, As Robert Khuzami's "Ethical" Reputation Lies in Ruins. After a few days ago we described in detail the facts behind the ACA lawsuit against Goldman, we were left scratching our heads how it could be that the SEC could ever possibly scuttle this criminal case which was obviously a slam dunk through court, and which based on the disclosures presented by ACA, is a blatant violation case of 10(b)-5 securities fraud and underwriter representation. We asked: did the SEC hide a key piece of the case against Goldman to fast track a settlement process?
- 114 Times More Insider Selling Than Buying In First Week of 2011.
- Rising Chinese Inflation to Show Up in U.S. Imports. When garment buyers from New York show up next month at China’s annual trade shows to bargain over next autumn’s fashions, many will face sticker shock.
- Have Gun, Will Talk: Arizona Sheriff Clarence Dupnik Not Speechless Over Tucson Shootings or Much Else. The sheriff, who celebrates his 75th birthday today, is understandably defensive. He had no officers at Rep. Gabrielle Giffords' Saturday open-air get-together in a shopping parking lot. Just the sight of a parked patrol car near a federal officeholder might have discouraged a troublemaker.
- Jared Loughner's Supremacists Tie Debunked. An Arizona law enforcement agency is backing away from a document it produced in the aftermath of Saturday’s shootings in Tucson – and which was leaked to Fox News – that linked the man accused with carrying out the crimes to a white nationalist publication.
Reuters:
- US to Press China on Yuan, Economy Ahead of Hu Visit. The United States wants a "real, demonstrative commitment" from China that it is serious about shifting away from export-led economic growth, a U.S. official told Reuters on Tuesday ahead of next week's state visit by China's Hu Jintao. Treasury Secretary Timothy Geithner will on Wednesday lay out his vision for how the world's two biggest economic powers should interact. But the official's comments indicate some impatience with China's gradual approach to allowing its currency to rise and building up domestic demand. "It's both the pace in which they do it and the conviction with which they demonstrate they're going to do it," said the senior Obama administration official, who spoke on condition of anonymity. "What we still need to see in the first instance is that real, demonstrable commitment to the objective" of rebalancing the economy, the official said.
- JPMorgan(JPM) CEO Eyes Dividend Hike in 2011. JPMorgan Chase could pay an annual dividend of 75 cents to a dollar once the Federal Reserve completes stress tests of the largest U.S. banks and gives its approval, Chief Executive Officer Jamie Dimon said on Tuesday.
- Short Bets in U.S. Stocks Fall in Late December. Bearish bets on major U.S. exchanges declined in the second half of December, suggesting investors abandoned their positions as the market advanced. Short interest on the Nasdaq declined 5.4 percent in the second half of December, the exchange said on Tuesday. Short bets on the New York Stock Exchange fell 5.5 percent.
- Germany's biggest banks may be taxed at a higher rate than expected under the c0untry's levy for financial institutions that is scheduled to come into force this year, citing a draft of plans for the implementation of the new law. The draft plan implies that a cap on the annual charge to banks, to be set at 15% of a bank's profits, may not fully apply.
- Euro-region governments are considering changing the terms for the bailout fund for member countries. The fund may extend the amount it can lend and lower the interest rate Ireland has to pay, citing European Union diplomats. The rate of 5.8% that Ireland is now required to pay is higher than the country's growth and needs to be adjusted to a bearable level, the diplomats said.
CSFB:
- Raised (PFS) Underperform, target $13.
- Raised (NYB) Outperform, target $21.
- Asian equity indices are unch. to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.50 -3.5 basis points.
- Asia Pacific Sovereign CDS Index 112.50 -2.5 basis points.
- S&P 500 futures +.03%.
- NASDAQ 100 futures +.12%.
Earnings of Note
Company/Estimate
- (CLC)/.56
8:30 am EST
- The Import Price Index for December is estimated to rise +1.2% versus a +1.3% gain in November.
- Bloomberg consensus estimates calls for a weekly crude oil inventory decline of -1,400,000 barrels versus a -4,161,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +1,148,000 barrel increase the prior week. Gasoline supplies are expected to rise by +2,100,000 barrels versus a +3,289,000 barrel gain the prior week. Finally, Refinery Utilization is estimated unch. versus a +.2% gain the prior week.
- The Fed's Beige Book.
- The Monthly Budget Deficit for December is estimated at -80.0 Billion versus -$91.4 Billion in November.
- None of note
- The Treasury's Geithner speaking on China, the Fed's Fisher speaking, $21 Billion 10-Year Treasury Notes Auction, weekly MBA mortgage applications report, IBD/TIPP Economic Optimism Index, (AUY) analyst day, Piper Jaffray Clean Tech Conference and the Deutsche Bank Real Estate Conference could also impact trading today.
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