Evening Headlines
Bloomberg:
- Fitch Puts U.K. Debt on Negative Outlook Days Away From Budget. Fitch Ratings said Britain risks losing its top investment grade because of its limited ability to deal with shocks, days before Chancellor of the Exchequer George Osborne will present his annual budget. Fitch changed the outlook on Britain to “negative” from “stable,” indicating a “slightly greater” than 50 percent chance that the AAA rating will be reduced within two years, the company said in a statement in London late yesterday, citing the weak economic recovery, high debt levels and threats from Europe’s debt crisis. Osborne will meet coalition partners later this week to agree on a budget he will present on March 21. The decision “reflects the very limited fiscal space to absorb further economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery,” Fitch said.
- Spanish Stocks Left Out of Rally on Rajoy Budget Gap Skepticism. Spanish stocks are the only developed market suffering losses this year as Prime Minister Mariano Rajoy fails to rein in the budget deficit fast enough to assure investors. The IBEX 35 Index (IBEX) has dropped 2.1 percent in 2012, the only decline among 24 developed markets tracked by Bloomberg. That compares with an 11 percent rally in the Stoxx Europe 600 Index (SXXP), the best start to a year since 1998. The Spanish gauge has erased all gains that followed the European Central Bank’s Dec. 8 announcement of unlimited three-year loans for banks at below- market borrowing costs. Investors are shunning Spain after Rajoy said the budget deficit will be higher than forecast while Germany praised Italian Prime Minister Mario Monti’s “bold” austerity measures. Spanish benchmark borrowing costs rose above Italy’s for the first time in almost eight months in March, while analysts have cut profit estimates for Spain this year at the fastest pace among Europe’s 10 largest markets. “Since you got Monti in Italy, the market has said, ‘Fine, Italy is in safe pair of hands,’” said Jacob de Tusch-Lec, a fund manager who helps oversee $18 billion at Artemis Investment Management in London. “It is tough to see in Spain for now what can resolve the crisis. Things are so bad that as an investor you ask yourself, ‘Do I need to be there?’”
- Republicans Accuse IRS of Scrutinizing Tea Party Groups. Senate Republicans today expressed concern that the Internal Revenue Service was singling out Tea Party groups for extra scrutiny in deciding whether to grant them tax-exempt status. “It is critical that the public have confidence that federal tax compliance efforts are pursued in a fair, even- handed, and transparent manner - without regard to politics of any kind,” the senators wrote to IRS Commissioner Douglas Shulman.
- Oil-and-Gas Boom Interrupts Greening of America: Caroline Baum. Anecdotes are no substitute for hard data. But when they start to reach a critical mass and they all tell the same story, you know something big is going on. -- A longtime car salesman relocates to south Texas to capitalize on the soaring demand for truckers to haul sand to hydraulic fracturing sites across the Eagle Ford shale formation. Nearby, the Corpus Christie School District can’t find bus drivers, who are getting paid a lot more to cart sand. -- Workers pour into Williston, North Dakota, drawn by offers of six-figure salaries for jobs connected with the Bakken shale formation. Even though housing development is sky- rocketing, the Wal-Mart parking lot looks like an RV park, packed with campers providing temporary living quarters until housing construction catches up with demand. -- There is no oil-and-gas drilling in Idaho, but Fleetwood Homes has been ramping up production and hiring workers to build pre-fab homes for shipment to the Bakken oil field in North Dakota, according to the Wall Street Journal. -- Energy independence, the Holy Grail for every U.S. president since Jimmy Carter, is within reach, oil-industry executives and analysts tell NPR. Within the next 10 years, the U.S. will no longer have to import crude oil and will be able to export natural gas, energy economist Philip Verleger says. PFC Energy Chief Executive Officer Robin West compares the impact of the “shale gale” to the fall of the Berlin Wall. -- Some long-haul trucking companies are converting to natural gas because of the cost advantage over diesel, according to Bloomberg News. Fleet owners that don’t convert a portion of their vehicles to natural gas will find themselves at an economic disadvantage. For anyone who hasn’t read or heard about it yet, there’s an oil-and-gas boom under way in the U.S. By some estimates, the U.S. has three times the proven shale oil reserves of Saudi Arabia.
- Watch Bernanke's 'Little' Inflation Capsize U.S.: Amity Shlaes. The thing about inflation is that it comes out of nowhere and hits you. Monetary policy is like sailing. You’re gliding along, passing the peninsula, and you come about. Nothing. Then the wind fills the sail so fast it knocks you into the sea. Right now, the U.S. is a sailboat that has just made open water, and has already come about. That wind is coming. The sailor just doesn’t know it.
- Wise Up on Goldman Sachs(GS). In his extraordinarily public resignation letter, Greg Smith, who had spent time recruiting the best and the brightest to Goldman Sachs, wrote, “I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.” The proper functioning of Wall Street is too vital to the economy to tolerate the duplicitous practices of Goldman Sachs and firms like it, especially after what the American people did to rescue these businesses in their darkest hours. The country’s political class appears to lack the power or will to hold large financial institutions to account. There is a massive leadership vacuum at the top of Wall Street today; and it’s quite possible that only continued, relentless public shaming will force the leaders of these firms to make the kinds of cultural changes necessary to bring their actions in line with normative behavior.
- China's Foreign Direct Investment Falls for Fourth Month. Foreign direct investment in China fell for a fourth straight month in February as companies reined in spending amid a slowdown in the world’s second-biggest economy and the prolonged European debt crisis. Investment declined 0.9 percent to $7.73 billion last month from a year earlier, the Ministry of Commerce said in a statement today, following a 0.3 percent drop in January. Overseas spending in the first two months decreased 0.6 percent to $17.7 billion. The outlook for foreign investment in China is “grim,” ministry spokesman Shen Danyang said last month, citing “slack” external demand, rising operating costs and funding difficulties faced by some companies.
- Buffett, Branson, Clooney, Among Guest for Cameron State Dinner. Billionaires Warren Buffett and Richard Branson and actor George Clooney are among the guests invited by President Barack Obama to a state dinner honoring U.K. Prime Minister David Cameron. The guest list released by the White House before tonight’s dinner includes business executives, government officials, entertainers and Obama political allies and donors. Joining Buffett, the chairman of Omaha, Nebraska-based Berkshire Hathaway Inc. (BRK/A), and Branson, founder of Virgin Group Ltd., are Blackstone Group LP President Tony James, Orin Kramer of Boston Provident Partners LP, movie producer Harvey Weinstein and Supreme Court Justice Antonin Scalia. It also includes Obama supporters such as Matthew Barzun, a former CNET Networks Inc. executive, who is leading fundraising for the president’s re-election campaign and Terry McAuliffe, a former Democratic National Committee chairman, and Neil Bluhm, a Chicago billionaire and co-chairman of Urban Shopping Centers Inc. (URB), who is an Obama fundraiser. The guests will dine on three courses and dessert, starting out with crisped halibut with potato crust, according the menu released by the White House. The main course is bison Wellington, which the menu describes as “a perfect pairing of U.S. and U.K. cultures.” As with the last two state dinners, the menu notes only that “an American wine will be paired with each course.” The White House hasn’t listed the wines on menus since Obama’s dinner in January 2011 for Chinese President Hu Jintao. One of the wines served then was a top-rated 2005 Cabernet Sauvignon from Washington state that originally sold for $115 a bottle and went for as much as $399 by the time of the dinner. While the White House paid a price closer to the $115 price, according to the vintner, some Obama critics highlighted the higher price as an extravagance.
- Rice Prices 10-30% Higher in Many Asian Nations. A number of countries in the Asia Pacific region have come close to their limit for agricultural expansion, Jose Graziano da Silva, director general of the Food and Agriculture Organization, said in prepared statement to be delivered at a conference in Hanoi today. High food prices and volatility remain a threat to nations, with retail rice prices in many Asian countries 10 percent to 30 percent higher than in 2011, according to the remarks.
- U.S. May Sanction India Over Level of Iran-Oil Imports. Obama administration officials say they are worried India may run afoul of a new U.S. law restricting payments for Iranian oil, forcing the White House to impose sanctions on one of its most important allies in Asia.
- Euro-Zone Firms Find Loans Hard to Get. Portuguese leather-goods maker Antonio & Mateus Ltd. had a plan to cope with the country's economic downturn. The small manufacturer decided it needed to find clients abroad, and earlier this year it landed a large order for purses from a French company. With limited funds to start production for the new order, the company asked its longtime bank, Banco BPI SA, for a €25,000 ($32,560) loan. The request was turned down within three days, despite a clean banking record.
- Yahoo(YHOO) Is Big Gun in Facebook Fight. Yahoo Inc.'s patent suit against Facebook Inc. pits a weakened Internet pioneer against a fast-growing tech powerhouse, but some intellectual-property experts say it is Yahoo that has the power position in the fight. Experts in the field view the number and quality of Yahoo's patents as potent weapons against Facebook in what could be a long and costly legal battle as the social-networking website prepares for its long-awaited initial public offering.
- Google(GOOG) Gives Search a Refresh. Google Inc. is giving its tried-and-true Web-search formula a makeover as it tries to fix the shortcomings of today's technology and maintain its dominant market share. Over the next few months, Google's search engine will begin spitting out more than a list of blue Web links. It will also present more facts and direct answers to queries at the top of the search-results page.
- ESL Fund Seeks to Calm Concerns on Sears Vendors. Edward S. Lampert's hedge fund has stepped in to make sure make sure vendors continue to supply Sears Holdings Corp. stores by assuming some of the risk of financial institutions that provide a form of insurance to the vendors.
- New iPad: a Million More Pixels Than HDTV. Apple's(AAPL) iPad could be described as a personal display through which you see and manipulate text, graphics, photos and videos often delivered via the Internet. So, how has the company chosen to improve its wildly popular tablet? By making that display dramatically better and making the delivery of content dramatically faster.
- SEC Cracks Down on Pre-IPO Trading. Federal regulators are cracking down on an obscure but booming market for trading shares in companies before they go public. The Securities and Exchange Commission brought charges against two money managers, alleging they misled and overcharged investors on funds formed to buy shares of Facebook Inc., Twitter Inc. and other social-media companies.
- Rod Blagojevich Just Gave An Utterly Bizarre Farewell Statement The Day Before He Goes To Prison For 14 Years.
- If Patents Are Weapons, These Companies Are Armed To The Teeth.
- Meredith Whitney: Invest In Citi(C)? Not In My Lifetime.
- 'Jerry Maguire' Memo Now Circulating Around Goldman Is Urging Employees To Follow Greg Smith And Quit.
- The Vampire Squid's Problems. Smith’s sentiments are appreciated, but actually he is wrong about a fundamental point, at least in today’s business environment. Goldman doesn’t have to give a damn about its clients because the vampire squid has found a much more lucrative way of insuring their bottom line: government largesse. Let’s be clear: the bailout of AIG was not a bailout of AIG. It was a bailout of Goldman Sachs, to whom AIG were a counter-party. AIG’s failure would have meant Goldman’s balance sheet — already stuffed with derivatives dynamite — blew up. Goldman — along with a whole slew of other firms who created and invested in these dynamite products — would have been bankrupt. And so the real problem is not Goldman’s rapaciousness. It’s the fact that systemic rapacity is being subsidised and protected by the government. Malpractice and malinvestment — such as the current global derivatives mesh which spreads risk around balance sheets like a pandemic — will in nature always eventually be punished by failure. That’s precisely what we saw in 2008, and that’s precisely what governments around the world crystallised and condoned through their bailout programs. Goldman have no incentive to change their business practices under the present conditions, and they won’t.
- Is Syria Near The Tipping Point?
- Dodd-Frank Could Shutter May Community Banks: Former FDIC Chair. Community banks have a lot to fear from the Dodd-Frank financial reforms, which could put half of them out of business, former FDIC Chairman Bill Isaac told CNBC Wednesday.
- China Removes Top Leadership Contender Bo From Post. The Communist Party boss of China's southwestern city of Chongqing, Bo Xilai, has been removed, state news agency Xinhua said on Thursday, following a scandal involving a senior aide who took refuge in a U.S. diplomatic mission last month. Bo, who has been a high-profile contender for top leadership, has been the subject of much speculation since Vice Mayor Wang Lijun, his longtime police chief, went to ground in the U.S. Consulate in nearby Chengdu until he was coaxed out and placed under investigation. The incident and the rumors it fanned have blotted Bo's prospects of climbing to the Party's top ruling body when a new generation of leaders is unveiled at a meeting late this year.
IBD:
NY Times:
- ObamaCare: If Possible, The News Is Getting Worse. ObamaCare is taking on water as we head into the second anniversary since it passed, and the news about the president’s signature legislation gets worse by the day. To mark the law’s two-year anniversary, the House of Representatives is planning a vote to repeal one of the law’s most unpopular provisions — the Independent Payment Advisory Board (IPAB), which many seniors fear will become Medicare’s rationing board. A few days later, the Supreme Court will hear a remarkable six hours of oral argument in the case with 26 states challenging the law’s constitutionality.
Reuters:
- Guess(GES) Sees Weak Profit; Shares Drop. Guess Inc forecast a weak first-quarter profit as it expects belt-tightening by European governments to hurt consumer spending, sending the U.S. clothing maker's shares tumbling nearly 13 percent in trading after the bell. Consumers in Europe have been hit by austerity measures as governments look to curb spending amid a debt crisis that has threatened to tear the single-currency Euro zone apart. "We expect European consumers, many in the south of Europe, to be affected in the short term by the austerity plans unless something dramatic happens with credit, banking or consumer confidence there," Chief Executive Paul Marciano said on a conference call with analysts. Europe contributed about 40 percent to Guess' total revenue for the fiscal year ended January. The company also expects margins to be pressured early this year by an overhang of last year's rise in product costs.
- Britain's Inflationary Route to Default. George Osborne’s idea of refinancing the national debt with 100-year gilts, or even gilts issued in perpetuity, is a bit too clever by half.
China Business News:
- Chinese Airlines' 1Q Profit May Drop 50% on Year. Airfares for domestic flights have dropped on year for the first time in three years. Airlines may post core operating losses in Feb. because of lower passenger and cargo volumes and high fuel prices, citing Zhu Feng, an analyst at Industrial Securities Co.
- China Brokers Limit ChiNext Stock Account Openings. Chinese brokerage halted account openings for inexperienced investors for trading shares listed on the start-up company board, citing brokerage notices.
- None of note
- Asian equity indices are -.50 to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 144.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 118.75 -4.5 basis points.
- FTSE-100 futures +.07%.
- S&P 500 futures +.14%.
- NASDAQ 100 futures +.23%.
Earnings of Note
Company/Estimate
- (ROST)/.85
- (SCHL)/-.69
- (DOLE)/-.12
8:30 am EST
- Empire Manufacturing for March is estimated to fall to 17.5 versus 19.53 in February.
- The Producer Price Index for February is estimated to rise +.5% versus a +.1% gain in January.
- The PPI Ex Food & Energy for February is estimated to rise +.2% versus a +.4% gain in January.
- Initial Jobless Claims are estimated to fall to 357K versus 362K the prior week.
- Continuing Claims are estimated to fall to 3408K versus 3416K prior.
9:00 am EST
- Net Long-Term TIC Flows for January are estimated to rise to $38.5B versus $17.9B in December.
10:00 am EST
- Philly Fed for March is estimated to rise to 12.0 versus 10.2 in February.
Upcoming Splits
- (ALK) 2-for-1
Other Potential Market Movers
- The Spain/France bond auctions, EU Finance Ministers meeting, SNB rate decision, (STR) analyst day, (LRN) analyst meeting, (MDU) analyst meeting, (EPL) analyst day, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.
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