Friday, February 11, 2011

Friday Watch

Posted by Gary .....at 1:09 AM

Evening Headlines
Bloomberg:
  • Mubarak Defiance of Ouster Calls Angers Protesters. Egyptian President Hosni Mubarak defied calls for his immediate resignation, agreeing only to delegate powers to his deputy, as thousands crammed into central Cairo demanding an end to his 30-year rule. Mubarak, 82, reiterated he intends to stay on as president until elections in September while day-to-day powers go to Vice President Omar Suleiman. President Barack Obama, in a statement issued after Mubarak spoke, said Egyptians were left “unconvinced” that the regime is “serious about a genuine transition to democracy.” Mubarak’s broadcast announcement was loudly rejected by the tens of thousands of opponents in Tahrir Square in expectation that he was preparing to quit. “Down with Mubarak,” they chanted, and many waved their shoes in a sign of disrespect. “I am not happy with this, he didn’t say anything new,” said Ahmed Ali, a demonstrator. “I won’t leave here.” With Friday prayers approaching, huge new protests were planned. The United Nations says has already resulted in 300 deaths over the past two weeks. Strikes by state workers and others have been spreading. Protesters braced for the possibility that the military will crack down. “We are here and willing to give more blood if this is what it takes to get rid of him and his thugs,” Haytham Saqr, 31, one of the protesters at Tahrir, said. “Demonstrations are continuing and plans of escalation are being discussed.”
  • Muslim Brotherhood's Katatni Says Mubarak Speech 'Not Enough'. Egyptian President Hosni Mubarak’s speech was not enough to end protests which will continue until his ouster, Mohamed Saad El-Katatni, a leader of the Muslim Brotherhood movement said today.
  • Oil Gains on Supply Concern After Mubarak Defies Call to Resign. Oil rose after Egyptian President Hosni Mubarak defied calls for his resignation, agreeing only to delegate some authority to his deputy, prompting concern supplies may be disrupted amid further unrest. Futures climbed as much as 1.2 percent in New York after Mubarak, 82, reiterated late yesterday he intends to stay on as president until elections in September, while handing powers to Vice President Omar Suleiman in a bid to placate his opponents. “The big risk is of contagion to the large oil-producing countries like Saudi Arabia or Iran in the region,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. The March contract gained as much as $1.04 to $87.77 a barrel in electronic trading on the New York Mercantile Exchange, and was at $87.54 at 1:04 p.m. Sydney time. “What we don’t know is if this is 1979 Iran all over again or if it’s completely different,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.
  • Goldman Sachs(GS) Former Chief Whitehead Says NYSE Deal 'An Insult'. John C. Whitehead isn’t celebrating the 219-year-old New York Stock Exchange’s plan to be acquired by Germany’s 18-year-old Deutsche Boerse AG. “I think it’s a terrible idea and I hope it can be stopped,” Whitehead, the 88-year-old former co-chairman of Goldman Sachs Group Inc., said in an interview yesterday. “It would be an insult to New York City, and New York State, and indeed to all America.” The erstwhile U.S. deputy secretary of state, NYSE director and Lower Manhattan Development Corp. chairman said his experience gives him the credibility to speak out against the potential takeover. “I speak out rarely, and this is one time when I can’t hold myself back,” he said, adding that the exchange is an “important symbol” of American capitalism and of New York City’s status as a global financial center. “I think of it as a holy institution,” he said.
  • China Adjusts Reserve Ratio for Some Small Banks, Securities Journal Says. China’s central bank imposed differentiated reserve requirement ratios on some of the nation’s small and medium-sized lenders after January loan growth surged, the official China Securities Journal reported today, citing an unidentified person. The adjustment, which mainly affected city commercial banks, was made after the Chinese New Year holiday that ended Feb. 8, according to the newspaper, an affiliate of the state-run Xinhua news agency.
  • Wheat's Rally to Fuel Gains in Rice, Zeigler Predicts. The price of rice, the staple food for half the world, may advance as wheat’s rally drives consumers to seek alternatives, according to Robert Zeigler, director general of the International Rice Research Institute. “Rice typically tracks wheat increases,” Zeigler said in an interview on Bloomberg Television today. “Wheat prices started to spike in last July, and rice prices followed them up,” Zeigler said, describing it as a “follow-on effect.”
  • Copper Advances for a Second Day on Supply Shortage Expectation. Copper climbed for a second day from London to Shanghai on expectation that supplies will not keep pace with demand as mining companies struggle to boost output. Tin jumped to a record. Three-month copper on the London Metal Exchange rose as much as 1.1 percent to $10,045 a metric ton and was at $10,011.25 at 10:04 a.m. in Singapore.
  • Buffett: Goldman(GS) Buy Was Bet U.S. Would 'Leverage Up'. Billionaire Warren Buffett said his $5 billion investment in Goldman Sachs Group Inc. at the depths of the financial crisis was a wager that Federal Reserve Chairman Ben S. Bernanke and then-Treasury Department Secretary Henry Paulson would take on debt to prop up the economy. Buffett’s Berkshire Hathaway Inc. bought preferred stock in New York-based Goldman Sachs in 2008 after the collapse of rival securities firm Lehman Brothers Holdings Inc. Paulson had left the chairmanship of Goldman Sachs in 2006 to join the administration of President George W. Bush. Berkshire gets a 10 percent annual dividend on the investment and received warrants to buy $5 billion in common stock with a strike price of $115 per share. Goldman Sachs traded for more than $165 a share today on the New York Stock Exchange, compared with $84.39 at the end of 2008.
  • Zoellick Says Rising Food Prices Squeeze Neediest. World Bank President Robert Zoellick said today there is “no doubt” that food prices are rising in Egypt and elsewhere, increasing pressure on the world’s neediest people. “There’s no doubt that we’re seeing rising food prices just as we saw a couple of years ago and it puts stress on the most vulnerable,” Zoellick said in an interview with Bloomberg television. “People often in developing countries spend half or three quarters of their income in food, so they’ve got little margin.” World food prices rose to a record in January on higher dairy, sugar and cereal costs and probably will remain elevated, the United Nations said earlier this month. An index of 55 food commodities climbed 3.4 percent from December to 231 points, the seventh straight increase.
  • GM(GM), Chrysler Salaried Workers' Bonuses Said to Reach as Much as 50% of Pay. General Motors Co. and Chrysler Group LLC, which each received government-funded bailouts, may award some managers bonuses of as much as 50 percent of their salary, said three people familiar with the plans. GM plans to pay 26,000 U.S. employees bonuses as high as 50 percent, with most managers receiving about 15 percent to 20 percent of their annual salary, said one of the people, who asked not to be named revealing internal plans. The payouts come as GM, Chrysler and Ford Motor Co. prepare for contract talks this year with the United Auto Workers, which is seeking a share of the industry’s growing prosperity. Ford, the only U.S. automaker to avoid bankruptcy in 2009, is expected to pay bonuses equal to 10 percent or more of base pay to some salaried staff, said a person familiar with the plan. “The union is going to be very angry about this,” said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Massachusetts. “If these kinds of bonuses are paid to salaried workers, then the union’s demands will increase, knowing management can’t claim an inability to pay.” GM reorganized in bankruptcy in 2009 with $49.5 billion in government aid, while Chrysler got $12.5 billion in assistance for its reorganization that year. Each is subject to pay restrictions after receiving funding from the U.S. government’s Troubled Asset Relief Program, which also aided banks. “Politically, it’s a bad thing to do,” Chaison said of the bonuses. “These companies are still not on solid ground yet, and it makes the auto companies look like banks” that distributed large bonuses. UAW President Bob King has said he aims to recover some of the $7,000 to $30,000 in concessions each worker gave up since 2005 to help the U.S. automakers survive. The union surrendered raises, bonuses and cost-of-living adjustments. The UAW also agreed to a two-tier wage system in which new hires earn about $14 an hour, half the amount paid to senior production workers. “All the sacrifices that our members made to turn these companies around were part of the process that’s really led to this amazing turnaround,” King said in an interview last month. “We want our membership to share in a very meaningful way in the upside of these companies.”
  • Dimon Calls Fannie, Freddie 'Biggest Disasters of All Time'. JPMorgan Chase & Co.(JPM) Chief Executive Officer Jamie Dimon said government-sponsored mortgage companies Fannie Mae and Freddie Mac were “the biggest disasters of all time” and a leading cause of the U.S. financial crisis. “That one was an accident waiting to happen,” Dimon said in an Oct. 20, 2010, interview with the Financial Crisis Inquiry Commission. The congressional panel yesterday released audio files of interviews gathered during its 18-month investigation into the causes of the crisis. “We all knew about it, we all worried about it, no one did anything about it,” Dimon, 54, told investigators. Dimon said lax lending standards across the industry and excessive leverage and risk-taking by banks helped cause the crisis. “You kind of got sucked into this whole sense of security because there were no losses,” Dimon said. “I would also say people lied. There was more and more of that in a frothy market.”
  • Buffett Tells FCIC It's Powerless to Stop 'Too Big to Fail'. Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc.(BRK/A), told the Financial Crisis Inquiry Commission that taxpayers will always be on the hook for collapses at the biggest U.S. companies. “You will always have institutions that are too big to fail, and sometimes they will fail,” Buffett, 80, told the FCIC in a May 26 interview, according to a recording released by the panel yesterday. “We still have them now. We’ll have them after your commission report.”
Wall Street Journal:
  • Mubarak Deepens Crisis. Egyptian President Hosni Mubarak handed power to his vice president but retained his title, a half-measure that confused observers, angered opposition leaders and provoked an uproar from hundreds of thousands of protesters massed in the center of the country's capital. The move sets up another conflict with the opposition movement, which has called on supporters to gather for a huge protest Friday. Expectations that the president would resign had built through the day, and the immediate reaction to the speech was anger, with protesters chanting "Leave, leave." An Army officer using a loudspeaker tried to calm protesters. "Let's save our energy for tomorrow," a man screamed to the crowd. "Go home and sleep, because tomorrow will be the day of judgment." The defiant tone taken by Mr. Mubarak—and widespread confusion about the meaning of his speech—left the Obama administration scrambling to devise its next steps in a crisis that appears out of its control.
  • Crisis Puts White House in Disarray. Egyptian President Mubarak's Refusal to Step Down Signals a Loss of Western Influence; Sense of 'Disbelief' After Speech. The defiant tone taken by Egyptian President Hosni Mubarak—and widespread confusion about the meaning of his speech—had White House officials stumbling for their next step in a crisis that was spinning out of their control.
  • Apple's(AAPL) Jobs Calls Shots From Home. Three weeks into a medical leave he took "to focus on my health," Apple Inc. Chief Executive Steve Jobs is staying closely involved in the company's strategic decisions and product development, according to people familiar with the matter. The 55-year-old Mr. Jobs, whose ailment hasn't been disclosed, has been taking business meetings at home and on the phone, these people said. He also has been seen on Apple's Cupertino, Calif., campus and in public in Palo Alto, Calif., with a company executive, said people familiar with the matter. Among products he is continuing to work on are the next version of the iPad tablet computer, expected out in the next couple of months, and a new iPhone, expected to be released this summer, said two of these people. Inside Apple, meanwhile, day-to-day operations continue nearly unchanged under Chief Operating Officer Tim Cook, said people inside the company and at its business partners. While some people at Apple said there was concern about Apple's future during Mr. Jobs's previous leave, Apple stock rose 78% while Mr. Cook steered the company through his nearly six-month absence. Mr. Cook's performance then has made Apple employees more secure about his taking the reins again, said people familiar with the matter. One of these people said Mr. Jobs often worked from home even before his leave. Apple's business has been gaining momentum, and people inside the company are enthusiastic about the new products and services they are working on, said the people familiar with the matter.
  • Goldman Sachs(GS) Reports 6.8% Stake In Genzyme(GENZ).
  • Panel Likely to Recommend Reversing Huawei Deal. A U.S. government panel is poised to recommend that the president unravel an acquisition made by China's Huawei Technologies Co., after the Pentagon sought review of the deal, people familiar with the matter said. The Committee on Foreign Investment in the United States is reviewing the telecommunications-equipment maker's $2 million deal last May to buy the assets of 3Leaf Systems, a Bay Area developer of technology that lets collections of server computers work together as a more powerful machine.
  • A Wells Fargo(WFC) Exit Puzzles. The abrupt departure of Wells Fargo & Co. Chief Financial Officer Howard Atkins and the unusual terms of the separation remain largely unexplained, even to senior executives and bank regulators. The circumstances surrounding Mr. Atkins's Tuesday departure were as puzzling to employees and regulators as they were for analysts and investors. In a news release about Mr. Atkins's exit, the company said only that it had nothing to do with the company's "financial condition or financial reporting."
  • Rise in Rates Is Headwind for Housing. U.S. 30-year mortgage rates have jumped above 5% for the first time since last spring, in a rapid rise that could present a challenge to the still-troubled housing market. The average rate on 30-year fixed-rate mortgages climbed to 5.05% in the week ended Thursday, according to a widely watched survey by government-backed mortgage company Freddie Mac, up from 4.81% a week ago.
  • Bundesbank Head's Move Angers Merkel. Weber's Decision to Not Seek Top Post at ECB Undermines Chancellor's Effort to Win Back Germans' Confidence on Euro. German Chancellor Angela Merkel, angered over Axel Weber's surprise decision not to pursue the presidency of the European Central Bank, is expected to press the Bundesbank head to resign his office as soon as she can name a successor, people familiar with the matter said. The loss of Mr. Weber as Germany's candidate to succeed current ECB President Jean-Claude Trichet, who is due to retire in October, has undermined a key plank of Ms. Merkel's strategy to restore Germans' confidence in the euro.
  • The Time for Spending Cuts Is Now. The White House argues that 'draconian' cuts will derail the economy. In fact, cuts are necessary to preserve tax rates that are compatible with economic growth. Let's put this in perspective: With the Congressional Budget Office (CBO) now projecting a federal budget deficit this year of $1.5 trillion, Mr. Obama is on course to add as much debt in one term as all 43 previous presidents combined. Not surprisingly, the rating agency Standard & Poor's is warning of a Treasury downgrade. Yes, the president is calling for a freeze on nondefense discretionary spending (18% of the budget). But this would leave that spending more than 20% higher than already- elevated 2008 levels, where Republicans would like to return. The freeze also cements in place a huge expansion of government originally sold as a temporary, emergency response to the economic and financial crisis.
CNBC:
MarketWatch:
  • News Corp.'s(NWS) Murdoch Makes Major Buy of NWS Shares. News Corp. (NWS, NWSA) Chief Executive Rupert Murdoch acquired nearly $20.2 million worth of nonvoting stock in his media empire, according to a filing with the Securities and Exchange Commission, marking his largest acquisition of company stock in years. A spokeswoman for the company, which owns this newswire and The Wall Street Journal, said the acquisition is "a sign of his belief in the future of the company." Murdoch purchased about 1.2 million Class A shares this week at an average price of $16.81 apiece.
Business Insider:
IBD:
  • Content Management Firm Moves Into Smart-Phone Market. One of those companies, Open Text (OTEX), has increased quarterly earnings at least 18% over the past five quarters as more clients adopt its enterprise content management (ECM) software. Its gear is used to manage everything from e-mails and documents to videos and marketing materials.
CNN Money:
  • IMF Calls for Dollar Alternative. The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency.
Dealbreaker:
LA Times:
  • California Spent $90 Million a Day on Unemployment Benefits. California's Employment Development Department spent $22.9 billion on unemployment benefits in 2010, a record amount, the EDD said Thursday. The benefits, paid to 1.7 million Californians, average out to about $90 million each business day. "The numbers are staggering and the need undeniable," said Pam Harris, chief deputy director of the EDD. The state paid out $20.2 billion in unemployment benefits in 2009. That topped the previous record of $8 billion that the state paid out in 2008. Some of the increase can be attributed to the federal unemployment benefit extensions passed by Congress in 2008 and 2009.
Fox Business News:
cnet:
  • Micron(MU) to Reveal Tech It Says Increases Chip Speed 20-Fold. Micron Technology tomorrow is set to disclose a hybrid memory technology that it claims will boost performance 20-fold over the memory chips used in PCs today. Micron, the largest manufacturer of memory chips in the U.S., says the "Hybrid Memory Cube" can tap into the full performance potential of DRAM--or dynamic random access memory--resolving a longstanding problem referred to as the "memory wall."
Rasmussen Reports:
USA Today:
  • Investors Push Money Back into Mutual Funds. In the past four weeks, individual investors who buy stocks through mutual funds have invested nearly $12 billion in domestic stock funds, Investment Company Institute data show. In contrast, investors have yanked $22.5 billion out of bond funds — which had been viewed as a haven — in the past 12 weeks. This is a sign of what could be a major shift in investor behavior, says Jack Ablin of Harris Private Bank. "It's the beginning of a trend."
Reuters:
  • Qualcomm(QCOM) Unveils New Chip Aimed at Tablets. Qualcomm Inc said on Thursday that its newest dual-core processor was designed to compete in the red-hot tablet market against Texas Instruments(TXN) and smaller rival Nvidia(NVDA), which has dominated design wins in early 2011. Qualcomm's APQ8060 dual-core Snapdragon processor is being used in Hewlett-Packard Co's "TouchPad", which was unveiled on Wednesday. Steve Mollenkopf, Qualcomm's Group president, said in an interview on Thursday that companies had agreed to use its processors in more 20 tablets.
  • U.S. Domestic Stock Funds Gain, Munis Lose - Lipper.
  • Chipotle(CMG), Panera(PNRA) Lead US Restaurant Results. Chipotle Mexican Grill Inc (CMG.N) and Panera Bread Co (PNRA.O) reported quarterly results that outshone their peers as many restaurants continue to struggle during a slow U.S. economic recovery. Both are relatively new chains that are rapidly adding more restaurants. They have found a following among diners who are willing to pay a bit more for quick meals made with upscale ingredients like naturally raised meats and artisan cheese. Chipotle and Panera have chalked up 12-month gains of about 160 percent and 40 percent, respectively, on industry-leading sales trends, and investors have wondered how long their outperformance would last. Chipotle, which features organic and natural ingredients, on Thursday said fourth-quarter sales at established restaurants jumped 12.6 percent, an acceleration from the 11.4 percent climb in the prior quarter. The Denver-based burrito chain also reported quarterly profit that topped Wall Street's view and repeated its forecast of a low-single-digit percentage gain in 2011 same-store sales. Shares in the company -- now facing a widening federal crackdown on its undocumented work force -- rose 8.6 percent to $278.80 in extended trading. Panera, which serves lavish sandwiches, salads and pastries, said same-store sales at company-owned bakery-cafes rose 5.2 percent in the fourth quarter. The company on Thursday reported fourth-quarter profit above analysts' average view, boosted its full-year earnings forecast and called for 2011 same-store sales growth of 4 to 6 percent. Panera's shares jumped 10.5 percent in extended trading.
Telegraph:
Beijing News:
  • The number of Chinese cities imposing limits on home purchases may double to 72. Home prices may begin falling month on month some time this year, citing Yang Hongxu, a researcher at E-House China R&D Institute.
China Daily:
  • Economic growth in China's Zhejiang must slow in the next five years as the province has "many problems" in its development, citing Governor Lu Zushan. The province's problems include "long-standing structural" issues that are largely due to "over-dependence" on low-end industries and low-cost labor, citing Lu. Zhejiang province's focus should shift to ensuring the "quality and sustainability" of its economy, Lu said.
Evening Recommendations
SunTrust Robinson:
  • Rated (LSTR) Buy, target $53.
  • Rated (AAWW) Buy, target $75.
Night Trading
  • Asian equity indices are -1.50% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 109.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 121.75 +4.75 basis points.
  • S&P 500 futures -.45%.
  • NASDAQ 100 futures -.34%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (CCE)/.28
  • (DISCA)/.52
  • (MDC)/-.17
  • (TOT)/1.58
Economic Releases
8:30 am EST
  • The Trade Deficit for December is estimated to widen to -$40.5B versus -$38.3B in November.
9:55 am EST
  • Preliminary Univ. of Mich. Consumer Confidence for February is estimated to rise to 75.0 versus a reading of 74.2 in January.
Upcoming Splits
  • (HRL) 2-for-1
  • (BLL) 2-for-1
Other Potential Market Movers
  • The (URI) investor day, (MU) analyst conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

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