Friday, March 25, 2011

Today's Headlines

  • VIX Heads for Biggest Seven-Day Drop on Record as Stocks Rally Worldwide. The benchmark measure of U.S. stock options headed for its biggest seven-day drop ever as the economy grew faster than previously reported and concern that the record Japanese earthquake will curb growth eased. The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 3.8 percent to 17.31 at 12:37 p.m. New York time, extending its retreat since March 16 to 41 percent. That’s the biggest drop over the same number of days for the VIX, which has averaged 20.38 in its two-decade history. Stocks have rallied seven consecutive days, driving the MSCI All-Country World Index of shares in 45 nations up 5.1 percent. The VIX, which measures the cost of using options as protection from losses in the Standard & Poor’s 500 Index, had jumped to 29.40 after the magnitude-9 quake in Japan on March 11 and resulting tsunami and crisis at a nuclear plant 135 miles (217 kilometers) north of Tokyo. “I’ve never seen such a change in tone,” said Christopher Rich, head options strategist at JonesTrading Institutional Services LLC in Chicago, who has been trading options for more than 30 years.
  • Obama Under Pressure to Clear 'Ambiguity' From Libya, Middle East Strategy. Almost a week after U.S. warplanes began dropping bombs on Libya, House Speaker John Boehner fired off a letter to President Barack Obama that posed a basic question: What are we fighting for? “The Obama administration does not have a simple tale to tell, and the tale it has told it has told poorly,” said James Lindsay, a former national security staff member in President Bill Clinton’s administration. “If you don’t tell your story well, you start off with less support.”
  • Japanese Swap Fish for Burgers, Soy Milk on Radiation Contamination Fears. Namiko Murata no longer gives her three children their favorite salmon, saury and mackerel for dinner. “I’m really paying attention to food because of the radiation problems,” said Murata as she waited in line at a Tokyo supermarket. “We gave up eating fish even though my family likes it very much. Now, for protein, we drink three cups of soy milk a day.” The detection of cobalt, iodine and cesium in the sea near the stricken Fukushima Dai-Ichi nuclear plant north of Tokyo this week hurt fish sales in the world’s second-biggest seafood market. Shoppers ignored reassurances their food and water were safe and countries from Australia to the U.S. restricted Japan food imports.
  • Company bond sales in the U.S. soared to a record this week as confidence grows that the economic recovery will withstand the tumult in Libya and a nuclear crisis in Japan. Verizon(VZ) and DuPont(DD) led at least $51.9 billion of offerings, more than a 400% rise from the period ended March 18, according to Bloomberg data.
  • U.S. Economy Grew 3.1% in Fourth Quarter, Revised From 2.8%. The U.S. economy grew at a 3.1 percent annual rate in the fourth quarter, led by a jump in consumer spending that will be hard to match early in the year as energy prices surge. The revised increase in gross domestic product compares with a 2.8 percent estimate issued last month, figures from the Commerce Department showed today in Washington. Earnings at financial firms led a 2.3 percent increase in corporate profits from October to December that capped the biggest annual gain in six decades. Another report showed consumer sentiment this month declined more than forecast as surging fuel prices squeezed household budgets. The Thomson Reuters/University of Michigan final index of consumer sentiment for March fell to 67.5 from 77.5 in February, the group reported. Company earnings adjusted for the value of inventories and depreciation of capital expenditures, known as profits from current production, rose by $38.2 billion from the third quarter. Domestic profits at financial corporations increased by $57.7 billion, while earnings at non-financial businesses fell by $10.1 billion. Earnings from operations overseas dropped by $9.4 billion. For the first time since before the recession began in December 2007, profits for the quarter reached a record, at $1.68 trillion at an annualized rate. For all of 2010, profits climbed 29 percent, the biggest annual gain since 1948.
  • Washington, D.C.'s Population Growth With Biggest White Influx Since FDR's Time. The District of Columbia’s population gained 5 percent, to 601,723, from 2000 to 2010, driven by the biggest jump in white residents since the 1930s, data released by the U.S. Census Bureau yesterday showed. The capital’s white population rose by 50,286, or 32 percent, to 209,464. The black population slid by 39,035 to 301,053 -- dropping to 50 percent of the city, the smallest share since the 1950s.
  • Kocherlakota Would Need 'Materially' Worse Data to Extend QE. “I am not one who would say that I would remove all possibility of further easing, but that would require conditions to worsen materially from what I forecast,” Kocherlakota told reporters today at an event in Marseille, France. “If the economy evolves the way I forecast, I would not foresee us doing further accommodation.”
  • Lockhart Supports Fed's Monetary Policy, Would Tighten to Curb Inflation. “I am prepared to support a change of policy if evidence accumulates that the low and stable inflation objective is at risk,” Lockhart said today in a speech in Fort Myers, Florida. “For now, however, I remain satisfied that the current stance of monetary policy is appropriately calibrated to the current and projected state of the economy and supportive of both the employment and price stability objectives.”
  • Unemployment Fell in 27 U.S. States in February, Labor Says. Unemployment decreased in 27 U.S. states in February, suggesting a strengthening labor market. The jobless rate fell the most in Nevada, where it reached 13.6 percent, figures from the Labor Department showed today in Washington.
  • 3M(MMM) Expands in Touch-Screen Films Amid 'Exploding' Market. 3M Co. (MMM), whose electronics unit supplies components to Apple Inc. (AAPL), is raising a 4-year-old bet on rapid smartphone growth by expanding in touch-screen films, which are also used on tablet computers and e-book readers. “The market is just exploding, and we are ahead of it,” Tony DeRose, business manager for 3M’s electronics markets materials unit, said in an interview. 3M values the global market for touch-screen materials at $2 billion and is boosting production capacity for optically clear adhesives, as the films are known, in South Korea, China, Taiwan and Singapore.
  • Chicago Fed's Evans Sees Less Need for More Accommodation. The Federal Reserve has less need to support an improving economy beyond the $600 billion Treasury purchase plan already in place, and any changes to the central bank’s stimulative policies should be considered some time after the program ends, said Charles Evans, president of the Fed’s regional bank in Chicago. “The economy definitely continues to improve each month,” Evans, 53, said today in a meeting with reporters at the bank. “It would be natural to expect that there would be some period of time between when the $600 billion is completed and an assessment of a change” in the trajectory of policy.

Wall Street Journal:
  • Incremental Progress Stokes Nuclear Fears in Japan. Japanese workers failed to restore power to parts of a crippled nuclear power plant but managed Friday to begin dousing fuel rods with fresh water, a development suggesting that the two-week effort to control the disaster continues to inch ahead. With the crisis at the Fukushima Daiichi power plant entering its third week, almost every day brings some incremental progress along with reminders that the process is painfully slow and fraught with danger. Workers at the six-reactor Fukushima Daiichi power plant, operated by Tokyo Electric Power Co., had hoped to connect the control room of the No. 2 unit to outside power and start cooling systems at the Nos. 1, 3 and 4 reactors by the end of Friday. Those efforts failed as workers battled a highly radioactive environment that put three employees in the hospital for possible burns. On Friday, Japan's Nuclear and Industrial Safety Agency said there was a suspected breach at reactor No. 3—possibly a crack or a hole in the stainless steel chamber of the reactor core, or in the spent fuel pool lined with several feet of reinforced concrete, according to the Associated Press. That could have contributed to injuries sustained by two workers Thursday when they stepped in a puddle that contained radiation levels 10,000 times higher than normal.
  • Spain's Bank Rescue Hits Headwinds. Spain's plan to rescue its regional banks is running into headwinds as private investors, who are being asked to pour in cash, and ratings firms raise questions about whether the lenders have admitted to all of their real-estate losses. Raising private capital to bail out Spain's private savings banks, or cajas, is an increasingly important test of confidence in Spain, especially since the market became convinced that neighboring Portugal would need a bailout.
  • Cisco(CSCO) CEO Chambers: U.S. Corporate Tax System's a "Dinosaur." While Congress considers an overhaul of the corporate tax system, CEOs are trying to get out front of criticism that multi-nationals aren’t paying a fair share. Cisco Systems Inc. CEO John Chambers will make the multinationals’ case to CBS’s Leslie Stahl during a CBS “60 Minutes” segment set to air Sunday.
  • Hedge Funds, Pimco Weigh Bid for AIG(AIG) Bonds.
  • Fed Official Hoenig to Retire. Federal Reserve Bank of Kansas City President Thomas Hoenig will retire on Oct. 1, marking nearly four decades of central bank service. The announcement by his bank Friday wasn't unexpected, as the official was widely known to be approaching the central bank's mandatory retirement age of 65. Mr. Hoenig is the longest served leader in the Federal Reserve system, having taken office in 1991.
  • China Seen as Buyer in Corn Sale. The U.S. reported a corn sale that traders see as proof of China's re-entry into the global market for the grain. The U.S. Department of Agriculture on Friday said private exporters struck deals to sell 1.25 million metric tons of corn, but didn't disclose the destination. Corn futures have surged 14% in the last week on expectations China had inked a deal for U.S. supplies.
Business Insider:
Boy Genius Report:
  • Apple(AAPL) 'Smart TV' in the Works, Analyst Suggests. Apple may be expanding its portfolio beyond just Apple TV to an actual “Smart TV,” according to Morgan Stanley analyst Katy Huberty. “Checks in Asia suggest Apple is working on a Smart TV prototype,” Huberty said in a note to investors on Friday. She also suggested that such a TV could help create a whole new Smart TV category. While there are already connected TVs that some manufacturer’s advertise as being “smart,” Huberty thinks Apple’s could include “TV/Video content, gaming, DVR as well as other features like apps and FaceTime.” By 2013, such a device could earn Apple roughly $4 billion for every 1% of the TV market it grabs, Huberty said.
  • Japan is considering easing radiation guidelines for food and water.

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