Friday Watch

Evening Headlines
Bloomberg:

• Libya Rebels Snub Chavez Mediation, Press Fight to Oust Qaddafi. Libyan opposition leaders rejected a mediation offer by Venezuelan President Hugo Chavez, an ally of Muammar Qaddafi, as armed rebels held out against regime attacks and prepared to push toward the capital of Tripoli. The Arab League held talks with Venezuela about Chavez’s call for a “mediation commission,” a league official, Hesham Youssef, said by telephone yesterday. Chavez said he spoke with Qaddafi about the proposal. Oil headed for a third weekly gain on concerns over the spreading Middle East unrest, while Gulf shares extended declines. The plan, which would involve what Venezuela called “friendly” nations, is a non-starter with the rebels, whose spokesman said Qaddafi “knows the way to the airport and he can leave.”
• Crude Oil Heads for Third Weekly Gain as Unrest Spreads Through Middle East. Oil headed for its third weekly gain in New York as unrest that has curbed crude exports from Libya spreads to the Middle East. Futures fluctuated near $102 a barrel today, paring earlier losses on signs the U.S. economic recovery is gaining strength. Libyan opposition leaders have rejected a mediation offer by Venezuelan President Hugo Chavez, an ally of Muammar Qaddafi, as rebels held out against regime attacks. Turmoil that has cut as much as 1 million barrels a day of Libya’s output threatened to spill over into Iran this week, OPEC’s second-largest producer. “It’s fear and the expectation that this unrest could spread” that has driven oil higher, Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, said by telephone today. Crude for April delivery traded at $101.94 a barrel, up 3 cents, at 8:49 a.m. Singapore time in electronic trading on the New York Mercantile Exchange. Futures are headed for a 4.1 percent gain in the past seven days after surging 14 percent a week earlier.
• CDO, CDS Fraud Probes to Be 2011 Priority, New York U.S. Prosecutor Says. U.S. criminal investigators will step up probes into possible fraud involving collateralized debt obligations and credit default swaps, a top federal prosecutor in New York said. Christopher Garcia, chief of the Securities and Commodities Fraud Task Force in the U.S. Attorney’s Office in Manhattan, told white-collar criminal-defense lawyers at a conference today that his office will spend this year investigating possible fraud involving CDOs and CDSs. “If there’s crime there, we’re going to find it and we’re going to pursue it,” Garcia said at an American Bar Association meeting in San Diego. Investigators won’t be deterred by the complexity of the financial instruments, he said. Garcia said in an interview after his presentation that his office is “bringing in people with expertise in these areas.” “It’s an enforcement priority,” he said.
• Greenspan Says Surge in Government 'Activism' is Hampering U.S. Recovery. Former Federal Reserve Chairman Alan Greenspan said a surge in U.S. government “activism,” including fiscal stimulus, housing subsidies and new regulations, is holding back the economic recovery. Increased bond issuance by the Treasury Department crowds out borrowers with the weakest credit ratings, Greenspan said in an article in International Finance, published on the Web today. At least half of the shortfall in companies’ capital spending “can be explained by the shock of vastly greater government- created uncertainties embedded in the competitive, regulatory and financial environments” since the failure of Lehman Brothers Holdings Inc. (LEHMQ) in 2008, Greenspan said. “Much intervention turns out to hobble markets rather than enhancing them,” said Greenspan, 84, who was appointed Fed chairman by Republican President Ronald Reagan in 1987 and served until 2006. “Any withdrawal of action to allow the economy to heal could restore some, or much, of the dynamic of the pre-crisis decade, without its imbalances.”
• Wen Sees Billionaires in China Congress as Wealth Gap Widens. As Chinese Premier Wen Jiabao this week opens the annual gathering of the National People’s Congress with a pledge to shrink China’s wealth gap, his challenge will be reflected in the makeup of the assembly itself. The richest 70 of the 2,987 members have a combined wealth of 493.1 billion yuan ($75.1 billion), and include China’s richest man, Hangzhou Wahaha Group Chairman Zong Qinghou, according to the research group Hurun Report. By comparison, the wealthiest 70 people in the 535-member U.S. House and Senate, who represent a country with about 10 times China’s per-capita income, had a maximum combined wealth of $4.8 billion, data from the Washington-based Center for Responsive Politics show.
• North Korea Tells South Korea to Return All 31 Nationals Rescued From Boat. North Korea demanded South Korea return all 31 of its nationals who drifted across the western sea border by boat last month after four of them said they didn’t want to return home. The government in Seoul “pressured them to remain in South Korea by appeasement, deception and threat,” North Korea’s Red Cross said late yesterday in a statement carried by the state- run Korean Central News Agency. “This cannot be interpreted otherwise than a grave provocation.”
• Insider-Trading Probes Send Investors Scurrying Even When No One's Charged. On the morning of Feb. 11, David Ganek gathered employees in the New York offices of Level Global Investors LP to tell them he was shutting the hedge fund he co- founded eight years earlier.

Wall Street Journal:

• Fear Stalks the Streets of Gadhafi's Capital. The residents of Libya's capital, subject to a clampdown as Col. Moammar Gadhafi loses much of the rest of his country to opponents, are gripped by fear and paranoia. Pro-Gadhafi security forces, visiting homes at night, have made scores of arrests. Families of some antigovernment activists have gone into hiding after receiving threats from officials. Doctors say patients with gunshot wounds—a sign the injured person may have been at a street demonstration—have been arrested and taken from hospitals. Some residents of Tripoli, home to two million of Libya's six million people, on Thursday described these and other incidents that form what they say is a tapestry of terror in the capital. As Col. Gadhafi has rallied his base, these people say, reprisals have escalated against those who protest his rule. Political uncertainty has warped the fabric of once-quiet neighborhoods, residents say, with some saying they are afraid to speak to longtime neighbors.
  
• GOP Aims to Tame Benefits Programs. House Speaker John Boehner said Thursday that he's determined to offer a budget this spring that curbs Social Security and Medicare, despite the political risks, and that Republicans will try to persuade voters that sacrifices are needed. In an interview with The Wall Street Journal, Mr. Boehner said House Republicans would offer a budget for the next fiscal year that sets goals for bringing the programs' costs under control. But he acknowledged that Americans are not yet ready to embrace far-reaching changes to Social Security and Medicare because they are not aware of the magnitude of the financial problems.
• Pressure Mounts on Absent Democrats. Republican lawmakers in Wisconsin and Indiana ratcheted up pressure on their absent Democratic colleagues Thursday, aiming to force an end to standoffs over bills that would limit public workers' bargaining rights. In Wisconsin, GOP senators unanimously passed a resolution finding their 14 Democratic colleagues in contempt. They ordered the Democrats to return to the Senate in Madison by 4 p.m.—and threatened them with arrest if they failed to comply. Indiana House Republicans moved to start fining missing Democrats $250 a day, beginning Monday.
• AOL(AOL) Says Huffington Post Deal Could Include Layoffs. Internet company AOL could lay off a portion of its employees following its acquisition of online news commentary site Huffington Post, AOL CEO Tim Armstrong said Thursday during an industry conference.
• US Offers Maine Wind Power Project $102 Million Loan Guarantee. The U.S. Energy Department on Thursday offered a $102 million loan guarantee to a proposed wind farm in western Maine.
• Lawmakers Ask SEC to Scale Back Muni Proposal. A growing chorus of lawmakers in the House and Senate is urging the Securities and Exchange Commission to scale back a broad proposal that would require federal registration and oversight of advisers to states and localities that sell municipal bonds. Already drawing protests from hundreds of local officials, the proposal is under scrutiny by House Financial Services Committee chairman Spencer Bachus (R., Ala.) as well as Sen. Orrin Hatch (R., Utah), the ranking Republican on the Senate Finance Committee.
• Networks Brace for NFL Hit. With a possible lockout of National Football League players looming, cable and broadcast companies are girding themselves for the loss of games at a time when the NFL has become one of the most important brands on television.
• Goldman's(GS) Blankfein Agrees to Testify at Insider-Trading Trial. Wall Street's best-known executive could be a surprising government witness at the high-profile criminal trial of Raj Rajaratnam. Goldman Sachs Group Inc. Chief Executive Lloyd C. Blankfein has agreed to testify for the U.S. government at the coming trial of Mr. Rajaratnam, the hedge-fund titan facing insider-trading charges, according to people familiar with the matter.
• Regulators Consider 10% Down Payment for Homes. Federal regulators are likely to issue two different proposals in forthcoming mortgage-lending rules for loans classified as lower-risk: one calling for a minimum 20% down payment; and another recommending a 10% down payment, according to people familiar with the matter. The proposal by six different federal agencies is part of an effort to rewrite rules for mortgage lending as part of the Dodd-Frank financial overhaul law enacted last year. The law requires banks to hold a portion of loans that are bundled and sold as securities, but it allowed regulators to exempt certain gold-standard residential mortgages from the costly new requirement. The debate over what regulators should classify as a so-called "qualified residential mortgage" could have sweeping implications for the U.S. mortgage market.

Bloomberg Businessweek:

• The Best Undergraduate B-Schools of 2011. With U.S. job growth still weak, business programs that top the latest Bloomberg Businessweek ranking are going global in a big way.

CNBC:

• Europe's Rising Rates Could Hurt Euro Zone Weaklings.
• China's 2011 Defense Budget Rises Nearly 13% to $91.5 Billion.
  

MarketWatch:

• China Central Bank to Revamp Money-Supply Measure. The People’s Bank of China has introduced new measures designed to improve statistical tracking of the nation’s money supply by including funds flowing through a wider variety of financial channels.

Business Insider:

• Bill Gates: States' Ridiculous Budget and Pension Accounting "Would Make Enron Blush".
• Saudi Arabia's Regime Will Fall, Says Analyst. As Libya descends into full-on civil war and protests spread across the rest of the Middle East, all eyes are focused on Saudi Arabia, which produces more than 10% of the world's oil. So far, protests in Saudi Arabia have been limited. But our guest, Fadel Gheit, a managing director at Oppenheimer & Co., thinks that may soon change.
• Chart of the Day: 99.7% of People Still Haven't Bought a Tablet Yet.
  

Zero Hedge:

• Fed Balance Sheet Hits New Record at $2.55 Trillion as Bank Reserves Hit $1.3 Trillion All Time High. (graphs)
• When Even John Taylor Says Bernanke's Interpretation of the Taylor Rule is Wrong. So is the entire US monetary policy based on a rule derivative that is not even endorsed by its creator? The answer is a resounding yes.
• Portugal, Which Has €20 Billion In Bond Maturity And Deficit Outflows In 2011, Has Only €4 Billion In Cash.
• Forget The Middle East, Spain Is Still The Elephant In The European Room!
  

IBD:

• Oracle(ORCL) Now a One-Stop Shop for Business Computing.

New York Times:

• Galleon Lawyers Accuse SEC of Tainting Jury. Lawyers for Raj Rajaratnam have accused the government of a deliberate attempt to taint the jury pool less than a week before the billionaire hedge fund manager goes on trial on charges of insider trading.
• In Price of Farmland, Echoes of Another Boom.
  

Forbes:

• Goldman(GS) Ups Apple(AAPL) Estimate on iPad 2. Apple estimates were increased today by Goldman Sachs through 2013, as the firm believes that the iPad 2 will be a sales catalyst for the company. Goldman issued a buy rating with a $450 price target.
  

CNN Money:

• World's Most Admired Companies.
• Wordpress Hammered by Massive DDoS Attack. One of the Web's largest blog hosting sites, Wordpress, struggled to keep functioning Thursday through a massive distributed denial of service (DDoS) attack. Matt Mullenweg, Wordpress' founding developer, called the assault "the largest and most sustained attack we've seen in our six year history." Its effects hit all three data centers run by Automattic, the San Francisco developer that owns Wordpress. "It's currently been neutralized, but it's possible it could flare up again later," Mullenweg said Thursday afternoon. "We suspect it may have been politically motivated against one of our non-English blogs, but we're still investigating and have no definitive evidence yet."

Washington Post:

• Ex-FBI Agent Who Disappeared in Iran is Alive, Clinton Says. A retired FBI agent who vanished in 2007 while investigating a smuggling case in Iran is apparently alive, Secretary of State Hillary Rodham Clinton said Thursday in a statement that deepened the mystery surrounding the man's nearly four-year-old disappearance. Robert Levinson, 63, who disappeared during a visit to the Iranian resort island of Kish, apparently is being held "somewhere in southwest Asia," Clinton said, citing unspecified evidence received by the State Department.
• Republicans Decry SEC Chairman's Response to Madoff Fraud. Two senior Republicans accused Securities and Exchange Commission Chairman Mary L. Schapiro on Thursday of mishandling potential conflicts of interest during her agency's response to Bernard Madoff's epic Ponzi scheme. Rep. Darrell Issa, chairman of the House Oversight and Government Reform Committee, and Sen. Charles E. Grassley of Iowa, ranking member of the Senate Judiciary Committee, said in a statement that Schapiro had allowed her general counsel to represent the agency on Madoff issues "without fully properly examining" his financial interest. The Republicans' criticism was the toughest since it came to light that former SEC general counsel David M. Becker and his brothers inherited and then liquidated a $2 million Madoff account years before the 2008 collapse of Madoff's fraud. Becker rejoined the SEC as general counsel in early 2009 and left the agency last week.

Lloyd's List:

• Europe-Asia Container Rates War Loom as Lines Undercut Rivals. MAJOR freight forwarders on the Asia-Europe westbound leg have raised concerns that the trade may once again be on the brink of a damaging freight rate war.

Seeking Alpha:

• Squeeze Ideas: 20 Biotech Stocks Targeted by Short Sellers.

Market News International:

• The European economy faces an inflation threat, citing Wang Jianxi, deputy general manager of China Investment Corp. Emerging markets also face a "very serious" threat of rising prices, Wang said. The European debt problem hasn't been fully resolved, Wang said.

Reuters:

• Wal-Mart(WMT) Hikes Dividend 20.6%. Wal-Mart Stores Inc said it is increasing its annual dividend nearly 21 percent, citing its ability to generate cash in a fiscal year that disappointed investors with weak U.S. sales. Wal-Mart said its board approved a dividend of $1.46 per year in fiscal 2012, which ends next January, up from $1.21. That translates to about $5.2 billion paid out to shareholders. The move would bring Wal-Mart's dividend yield to 2.81 percent, based on its closing stock price of $52.01 on Thursday on the New York Stock Exchange.
• Juniper(JNPR) Sees Market Growing to $66 Billion in 3 Years. Juniper Networks Inc said it expects its market opportunity to grow more than 60 percent over the next three years, as it launches more advanced network equipment and enters new markets like mobile security.
• ETFs Lead Inflows into US Equity Funds - Lipper.
• Cooper Cos(COO) Q1 Tops Street, Raises FY View. Cooper Cos Inc posted a quarterly profit that topped market expectations on strong revenue and better margins, and the contact lens maker raised its earnings and revenue forecast for the fiscal 2011.
• SAC Gains in February, Pershing Swings to Gains. Hedge fund managers are slowly telling investors how they performed in February and some firms appear to have scored better returns than at the start of the year when returns were more mixed. Steven Cohen's SAC Capital Advisors, famous for years of eye-popping returns, inched up 1.15 percent last month, an investor said. In January, the $13 billion fund gained 1.75 percent.

Foreign Policy:

• At UN, The Inmates are Running the Asylum. Libya's tenure on the U.N. Human Rights Council is just the latest example of how the international system has been hijacked by the world's most repressive regimes. The recent unrest in parts of the Arab world has not only exposed the appalling lack of development in these countries, but also a number of fundamental deficiencies in the international system. The United Nations, which began its life with a plurality of democratic nations, now allows for an automatic majority of nondemocratic nations. The international system dictates that Arab and Islamic nations, and their knee-jerk defenders, have a majority in almost all of its bodies. This is amply demonstrated by the disproportionate amount of time spent condemning Israel.

Financial Times:

• Foxconn Technology Group will move 200,000 jobs inland from its manufacturing plants in Shenzhen to cut costs, citing Louis Woo, special assistant to Chairman Terry Gou. The company plans to shift all of its "mass manufacturing" to other sites and will make Shenzhen its "engineering campus," the report said.
• Air fares could rise by as much as 40 euros a ticket after the European Union's emissions-trading plan adds extra costs to airlines from the beginning of 2012, citing a report by S&P.
  

Xinhua:

• BYD Co.'s February auto sales fell 22% to 26,521 units from the previous year.

Evening Recommendations
Citigroup:

• Reiterated Buy on (MGA), target $61.
• Reiterated Buy on (TOO), target $33.

Night Trading

• Asian equity indices are +.75% to +1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 107.0 -2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 118.0 -2.0 basis points.
  
• S&P 500 futures +.07%.
  
• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note
  

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for February is estimated at 196K versus 36K in January.
• The Change in Private Payrolls for February is estimated at 200K versus 50K in January.
• The Unemployment Rate for February is estimated to rise to 9.1% versus 9.0% in January.
• Average Hourly Earnings for February is estimated to rise +.2% versus a +.4% gain in January.
  

10:00 am EST

• Factory Orders for January are estimated to rise +2.0% versus a +.2% gain in December.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Nelson speaking, (AET) investor conference and the (HW) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the day.