Thursday, March 24, 2011

Thursday Watch

Posted by Gary .....at 12:29 AM

Evening Headlines
Bloomberg:
  • Portugal Pushed Closer to EU Bailout After Socrates Budget Cuts Defeated. Portuguese Prime Minister Jose Socrates tendered his resignation after plans to cut the budget were rejected by parliament, pushing the country closer to an international bailout. President Anibal Cavaco Silva said late yesterday he will meet the main parties on March 25 and the government will retain its powers until he accepts Socrates’s resignation. The vote came hours before European Union leaders meet in Brussels to sign off on measures aimed at drawing a line under the region’s sovereign debt crisis. The risk is that investors dump Portuguese bonds in the face of a political stalemate that delays the negotiation of a rescue package, which Royal Bank of Scotland Group Plc estimates may be worth around 80 billion euros ($113 billion). The cost of insuring Portuguese debt against default is near a record high. “It’s pretty inevitable” that Portugal will need a rescue, said Jacques Cailloux, a London-based economist at Royal Bank of Scotland, in a phone interview. “The market will deteriorate in the absence of other measure going through. There is obviously the risk of further downgrades, which will become anticipated by the markets and be a self-fulfilling prophecy.” The spread between Portuguese and German 10-year bond yields widened 16 basis points to 438 basis points yesterday after reaching a euro-era record of 484 on Nov. 11.
  • Top-Ranked Fund Backs Portugal Over Spain on Banks: Euro Credit. The Spanish economy is in even worse shape than Portugal's because of losses linked to real estate at the country's banks. That's the view of Fernando Bernad, who helps manage funds including Spain's top-performing Bestinver Bolsa, which returned 281% during the past decade. Bernad's outlook conflicts with increasing speculation that Portugal may follow Greece and Ireland in requiring a European Union-led financial rescue. "We think that the Portuguese economy has fewer problems than Spain's and that the market is wrong it its evaluation of the relative problems of Portugal and Spain," Bernad said. The spread between the yield on 10-year Portuguese debt and Spanish bonds of similar maturity has widened to 242 basis points from 78 on Dec. 7.
  • U.S. Credit-Default Swaps Increase With Portugal 'On the Brink'. The cost of protecting U.S. corporate bonds from default rose as Portugal’s pending budget vote, which may trigger a bailout, put Europe’s debt crisis back in the spotlight. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 0.2 basis point to a mid-price of 97 basis points as of 5:19 p.m. in New York, according to index administrator Markit Group Ltd. “Portugal is on the brink and that still has to fully register with investors, what that means for this continent,” said David Nowakowski, strategist at Roubini Global Economics LLC in London. “It still has to be dealt with at some point and that’s going to be pretty soon.” “We don’t think the risks are fully priced in,” he said. The credit swaps index, which typically rises as investor confidence deteriorates and falls as it improves, is up from 79.2 basis points on Feb. 8. “The whole situation is bad and getting worse,” said Bonnie Baha, head of the global developed credit group at DoubleLine Capital LP, which has $9 billion under management. “Investors have very short memories. I don’t think they appreciate the interconnectivity between the European banking system and the rest of the world.”
  • Boehner Calls on Obama to Explain 'Contradiction' on Libya. U.S. House Speaker John Boehner asked President Barack Obama to explain the “contradiction” between U.S. goals for regime change in Libya with a United Nations mandate limited to curbing Muammar Qaddafi’s ability to attack civilians. In a letter today, Boehner asked the president how the Libyan leader would be removed from power if the UN resolution authorizing force against Qaddafi “makes clear that regime change is not part of” the international mission.
  • Allies Pressure Qaddafi Forces as U.S. Seeks NATO Command. Libyan government forces increased their attacks on cities, killing 16 people yesterday in embattled Misrata and six in the nearby coastal town of Zentan, opposition spokesman Abdulhafid Ghoga said at a news conference in Benghazi.
  • Hong Kong Bars Some Japan Produce After Finding Elevated Radiation Levels. Hong Kong barred imports of agricultural products from parts of Japan after finding levels of radioactive iodine in turnip and spinach samples as much as 10 times the level the city allows in food. Hong Kong will bar dairy products, vegetables, fruits, meat and seafood from the five Japanese prefectures most affected by the March 11 quake, Clement Leung, the city’s director of food and environmental hygiene, said at a press conference yesterday. “We have reason to believe that contaminated food has had the chance to flow out from Japan,” Leung said in the e-mailed press release yesterday.
  • Japan Misses Deliveries as Xbox Shop Struggles: Freight Markets. Microsoft Corp. (MSFT)’s repair operations for Xbox units ground to a halt in Japan’s Fukushima prefecture when the earthquake knocked out power. Then the lights came on to reveal another hurdle: Shipments of the game consoles had been impaired after the disaster two weeks ago. Microsoft is among hundreds of companies affected by the loss of normal pickups and deliveries. United Parcel Service Inc. (UPS) and FedEx Corp. (FDX) couldn’t reach the facility in northeast Japan for several days, said a person familiar with the matter who isn’t authorized to comment publicly.
  • Indian stocks have diverged from global equities by the most in more than five years, as accelerating inflation spurred higher interest rates and corruption allegations sapped investor confidence. The correlation coefficient for the benchmark Bombay Stock Exchange Sensitive Index and the MSCI All-Country World Index fell to .15 on March 21, the lowest since August 2005, data compiled by Bloomberg show. The Sensex has tumbled 11% this year.
  • CNOOC Plans New Oil Fields, Acquisitions After Record Profit. Cnooc Ltd. (883), China’s biggest offshore oil producer, plans to start new fields at home and add assets abroad after its fastest output growth boosted annual profit by 85 percent. “Rapid growth of the company’s production will continue over the next few years,” Chairman Fu Chengyu said yesterday after reporting net income reached a record 54.4 billion yuan ($8.3 billion). Cnooc will tap its cash flow to ramp up exploration and acquire more assets, Fu said in Hong Kong.
  • Red Hat(RHT) Rises as Revenue, Earnings Beat Analysts' Estimates. Red Hat Inc. (RHT) rose as much as 10 percent in extended trading after the largest seller of Linux software reported fiscal fourth-quarter revenue and per-share earnings that exceeded analysts’ predictions. Sales rose 25 percent to $244.8 million in the three months that ended Feb. 28, compared with the $235.1 million average estimate of analysts surveyed by Bloomberg. Per-share earnings, excluding certain items, were 26 cents, beating the 22 cents projected by analysts.
Wall Street Journal:
  • Saudis Raise Pay and Plan Polls, But Woes Linger. A host of new benefits promised recently by Saudi King Abdullah will boost the income of many Saudi citizens and may help the kingdom avoid the regime-shaking unrest that has roiled neighboring Arab countries. But the estimated $93 billion of government handouts doesn't address one of the kingdom's most destabilizing problems: the persistently high level of unemployment among Saudi youth, some analysts, employers and job seekers say.
  • Algerian Protesters Clash With Riot Police. Hundreds of people clashed with riot police in a poor neighborhood of the Algerian capital on Wednesday, in an eruption of violence that speaks to the growing social unrest across the North African country. The clashes broke out at dawn when city authorities ordered bulldozers to destroy a group of houses built on a public garden on the grounds that they had been illegally constructed. Estimates of the number of people injured differed: Witnesses said about 40 wounded people were evacuated by ambulances. Local police said 20 people, mainly police officers, had been hurt in the clashes.
  • Executive Showdown at the Big Board Corral. In 2008, NYSE Euronext Chief Executive Duncan Niederauer arrived at an investor conference early to hear comments by Robert Greifeld, the head of rival exchange operator Nasdaq OMX Group Inc.
  • Tax Holiday Rejected On Overseas Profits. The Obama administration on Wednesday rejected the idea of a tax holiday for U.S. multinationals' overseas income, criticizing a plan being floated by some House Republicans and multinational companies for a stand-alone relief measure.
MarketWatch:
  • Japan Agency: Radiation High Outside 30-km Radius. People living outside a 30-kilometer radius of Japan's stricken nuclear power plant may have been exposed to elevated levels of radioactive substances, an estimate by Nuclear Safety Commission of Japan showed late Wednesday. In some parts of cities and towns more than 30 kilometers northwest and south of Tokyo Electric Power Co.'s (9501.TO) Fukushima Daiichi nuclear power station, people may have been exposed to a total of more than 100,000 microsieverts of radioactive iodine since the beginning of the nuclear disaster following the March 11 earthquake and tsunami in Japan, the estimate showed. The allowable annual radiation exposure for workers in radiation operation and police and firefighters in disaster prevention is 50,000 microsieverts, and the limit in case of an emergency operation is at 100,000 microsieverts, according to Ministry of Education, Culture, Sports, Science and Technology.
CNBC:
  • Box Office Bomb: Hollywood Receipts Down 20% This Year.
  • Japan May Take On Portion of Tepco's Compensation. The Japanese government is looking at paying off a portion of the compensation Tokyo Electric Power will owe to evacuated residents, local farmers and others directly hit by the emergency at the Fukushima Daiichi nuclear power plant, the Nikkei reported.
  • Why Won't the Fed Accept a Profitable Deal From AIG(AIG)? For months, the Federal Reserve has insisted it has an exit strategy in place and has all the tools necessary for reversing the extraordinary monetary policy put in place during the financial crisis. But now, faced with a formal offer to exit at a profit from one of the thorniest crisis-era holdings on its balance sheet, the Fed has remained silent and seemingly without a strategy.
Business Insider:
Zero Hedge:
  • The "Fukushima Fifty" Whatever one thinks about the near-criminal strategy taking place behind the scenes as to how Japan is handling the bailout, one thing is certain: the 50 Tepco workers who are currently laboring at Fukushima, doing all they can to restore the plant back to life, even at the cost of their own lives, are doing a tremendous service to their fellow citizens (futile or otherwise), and deserve to be called heroes. The Mail has compiled what little information is available about these impromptu martyrs, of whom five are believed to have already died and 15 are injured while others have said they know the radiation will kill them, in a piece that everyone should read.
  • Fukushima Deteriorates Again as Steam Now Rising From Reactor 1 for First Time, Including All Other Reactors; Reactor 5 Cooling Fails.
IBD:
New York Times:
Forbes:
  • Bank of America(BAC), JPMorgan(JPM) Cling to Top Positions in Bank Rankings. In a ranking of the 50 largest banks and thrifts by assets the top 13 banks saw no changes in their positions in the fourth quarter of 2010. Bank of America kept the top spot with $2,264.9 trillion in total assets followed by JPMorgan Chase with $2,117.6 trillion. The two banks are the only ones on the U.S.-based list with more than $2 trillion in assets.
CNN Money:
  • Toyota(TM) Tells U.S. Plants 'Prepare to Shut Down'. Toyota's U.S. manufacturing arm is preparing for a possible shutdown because of parts shortages from Japan, a Toyota spokesman said. Word has gone out to all 13 of Toyota's factories in the United States, Canada and Mexico. This does not mean that the plants will stop working, Toyota spokesman Mike Goss said, but that they should be ready in case the need arises.
Rasmussen Reports:
The Daily Caller:
Reuters:
  • Libya Rebels Name US-Based Academic as Finance Chief. The Libyan rebel national council on Wednesday named U.S. based academic Ali Tarhouni as the top financial official in a transitional government they are in the process of setting up. Tarhouni will head the financial and commercial committee, in effect acting as finance minister, spokeswoman Iman Bughaeus told reporters. Tarhouni has a doctorate in economics and finance from Michigan State University and teaches at the Foster School of Business at the University of Washington, Seattle. "He understands the Western mentality," she said. Tarhouni has been a member of the Libyan opposition for 40 years while living in the United States.
  • Chipmaker Micron(MU) Focuses on Japan Wafer Supplies. Micron Technology is trying to secure its supply of crucial silicon wafers following Japan's devastating earthquake and said it was too soon to gauge the disaster's impact on its business. Immediately following the quake earlier this month, shares of Micron surged on news that competitor Toshiba temporarily stopped production of NAND flash memory chips -- used in smartphones and other wireless devices -- at its facilities in Yokkaichi. But executives at the top U.S. maker of memory chips for computers and mobile devices told analysts on a conference call on Wednesday it was too early to say whether the natural disaster would amount to a net benefit or hindrance.
  • Citi(C) Reverse Split Will Hit Trading Volume. Citigroup's reverse share-split could lead to a sharp reduction in U.S. equity trading volume, hurting the profitability of exchanges and traders.
  • US Domestic Equity Fund Outflows Now at 3 Weeks - ICI.
Financial Times:
  • Oil companies, including OMV AG, DNO International ASA and Occidental Petroleum Corp.(OXY), are evacuating foreign employees from Yemen as the political turmoil and violence in the country escalates, citing officials.
  • Libya Coalition Command Talks Fail Again.
Expansion:
  • The Spanish banking industry will get a "massive" ratings downgrade by Moody's Investors Service today.
Sueddeutsche Zeitung:
  • German carmakers are considering government-subsidized shorted work hours owing to the Japan crisis, citing the Federal Labor Agency.
NHK:
  • The Tokyo government will distribute 240,000 bottles of water on March 24 to families with infants after radioactive material was found in the city's tap water.
  • Tokyo Electric Power Co. Executive Vice President Takashi Fujimoto said at a briefing that power blackouts will be inevitable this summer.
China Daily:
  • China Plans $152 Million Artificial Rain Program. China will invest more than $152 million in the nation's first regional program to artificially enhance percipitation, citing Wang Guanghe, deputy director of the artificial weather intervention center under the China Meteorological Administration.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 115.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 117.0 unch.
  • S&P 500 futures -.03%.
  • NASDAQ 100 futures -.03%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (CAG)/.46
  • (TLB)/-.18
  • (BBY)/1.84
  • (GME)/1.56
  • (DRI)/1.04
  • (ORCL)/.50
  • (FINL)/.65
Economic Releases
8:30 am EST
  • Durables Goods Orders for February are estimated to rise +1.2% versus a +2.7% gain in January.
  • Durables Ex Transports for February are estimated to rise +2.0% versus a -3.6% decline in January.
  • Cap Goods Orders Nondef Ex Air for February are estimated to rise +4.3% versus a -6.9% decline in January.
  • Initial Jobless Claims for last week are estimated to fall to 383K versus 385K the prior week.
  • Continuing Claims are estimated to fall to 3700K versus 3706K prior.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Duke speaking, Bloomberg weekly Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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