Thursday Watch

Evening Headlines 
Bloomberg: 

• EU Seeks Broad Transaction Tax to Curb Rules ‘Patchwork’. The European Union will propose a far-reaching tax on financial transactions which could be collected worldwide as soon as Jan. 1 next year by the 11 nations that have so far signed up to participate. The plan by the EU in Brussels, to be outlined today, invokes “residence” and “issuance” ties to firms in participating countries, in a bid to prevent traders from escaping the levy by trading outside the tax’s zone, according to documents obtained by Bloomberg News. The plan says that to escape the proposed tax entirely, firms in other nations would have to entirely cease financial-services business with the 11 EU nations involved.

• Italy Tax Pledges Spook Investors as Economy Wilts: Euro Credit. Italian voters, being wooed by promises of lower taxes that are spooking investors, will get a reality check today with data probably showing the country slipping deeper into its fourth recession since 2001. 

• BOJ Rejects Keeping Virtually Zero Rates Until Price Goal Near. The Bank of Japan rejected a proposal for keeping interest rates virtually at zero until a price target is in sight and refrained from adding to stimulus, ahead of leadership changes next month. The central bank kept its asset purchase fund unchanged at 76 trillion yen ($813 billion), according to a BOJ statement released in Tokyo today. That was in line with analysts’ forecasts. Policy makers rejected board member Ryuzo Miyao’s call for the pledge on rates.

• Sakakibara Says Japan Punishes Neighbors as Yen Falls Toward 98. Japan is punishing its trading partners by guiding the yen toward levels that haven’t been seen in almost four years, said Eisuke Sakakibara, a former Ministry of Finance official. Japan’s currency has entered a range of between 88 to 98 per dollar, according to Sakakibara, known as “Mr. Yen” for his efforts to influence exchange rates in the late 1990s. An official from a Group of Seven nation said Japan will be in the spotlight at the Group of 20 gathering this weekend amid concern the yen’s slide has been excessive. “Guiding the yen lower is a policy that punishes neighboring nations,” Sakakibara, 71, said in an interview in Tokyo yesterday. Impressions overseas that Japan is trying to orchestrate further declines in the yen mean that “it will be criticized by the G-7, as well as the G-20,” he said.

• China’s Citic to Buy 13% Stake in Alumina for A$452 Million. Citic Group Corp., China’s largest state-owned investment company, will pay about A$452 million ($468 million) for a stake in Alumina Ltd., partner in the world’s biggest alumina business.

• Perry Goes to California for Jobs After Brown 'Fart' Remark. First, California Governor Jerry Brown mocked a Texas ad campaign to lure jobs from his state as a “burp, barely a fart.” Then Texas Governor Rick Perry escalated the battle with a four-day recruiting trip to Brown’s state, capped by a news conference today to boast of his efforts. “It’s not about bashing California, it’s about promoting Texas,” said Perry, 62, a Republican, on a conference call with reporters. “The ad campaign is doing what it was intended to do: get people talking about the differences of California and Texas.” 

• State Farm Invests in Iran-Linked Firms, California Says. State Farm Mutual Automobile Insurance Co. and units of Cigna Corp. are among insurers investing in firms that do business with Iran, California Insurance Commissioner Dave Jones said. An ING Groep NV unit also has Iran-linked holdings, according to a statement today from Jones. Insurers that operate in California have $198 million invested in firms that do business with Iran’s military, energy and nuclear sectors, down from about $6 billion in 2009 when California began pushing them to divest, Jones said.

• Apple(AAPL) Says It Will Fight Greenlight’s Bid to Block Vote. Apple Inc. said it will fight Greenlight Capital Inc.’s bid to bar the company from adopting a measure restricting its ability to issue preferred stock. 

• Dell(DELL) Said to Plan Shareholder Meetings to Assess Demands for LBO. Dell Inc. is setting up meetings with shareholders to assess their demands for getting its $24.4 billion buyout done and also preparing a public response to critics of the deal, said people with knowledge of the situation.

Wall Street Journal:

• U.S. Funds Score Big by Betting Against Yen. Some of the biggest U.S. hedge-fund investors have made billions betting against the yen, exploiting Japan's determination to weaken its currency and boost its economy. Wagering against the yen has emerged as the hottest trade on Wall Street over the past three months. George Soros, who made a fortune shorting the British pound in the 1990s, has scored gains of almost $1 billion on the trade since November, according to people with knowledge of the firm's positions. Others reaping big trading profits by riding the yen down include David Einhorn's Greenlight Capital, Daniel Loeb's Third Point LLC and Kyle Bass's Hayman Capital Management LP, investors say. 

• Tensions Mount as China Snatches Farms for Homes. 

• U.S. Slams EU's Tax-on-Trades Plan. European Commission Says Proposed Levy Could Raise €35 Billion Annually for the 11 Participating Countries. The U.S. Treasury said it opposes plans by 11 European Union countries to impose a small tax on trades in shares, bonds and derivatives. The European Commission, the EU's executive arm, will propose a new financial-transaction tax it says could raise as much as €35 billion ($47 billion) a year for the 11 participating states, which include Germany, France, Italy and Spain, according to documents to be published Thursday and seen by The Wall Street Journal.

• China's 'Wall' Hits Business. Firms Say Censorship Slows Web Connections, Curbs Access to Services.

• Four Key Questions for Health-Care Law. Thanks to the Supreme Court and Barack Obama's re-election, the Affordable Care Act—"Obamacare" to foes and a few of its friends—isn't going away. The issue now is how it will work. 

• The Rookie. If there's a crisis on Jack Lew's Treasury watch, buy gold.

• Henninger: The State of Obama. The State of the Union speech was about just one thing: the Obama project. Here's what has to be understood. It's all about him. A State of the Union speech normally is about relating a president's public policies to conditions in the country. An Obama State of the Union speech is about one thing: the Obama project.

Fox News:

• Treasury nominee Lew pressed on $1M bonus from bailed-out firm. (video) Treasury secretary nominee Jack Lew was challenged Wednesday over a nearly $1 million bonus he accepted from Citigroup just as the company was getting bailed out by the government, at an at-times tense confirmation hearing on the Hill. 

MarketWatch.com:

• Eight states join lawsuit challenging Dodd-Frank. Lawsuit: System to dismantle a big failing bank is unconstitutional.

CNBC: 

• American and US Airways Merger Create World's Largest Airline.

• Big Investors Lead Bets Against Junk Bonds. Some of the world's most sophisticated credit investors have been ramping up their bets against junk bonds even as retail investors have been pouring money into the asset class. The list of junk-bond bears includes GSO, the credit arm of Blackstone; Apollo Global Management; Centerbridge Partners; Oaktree Capital; and a host of credit and so-called "macro" hedge funds, according to executives familiar with the firms' investment activities.

Zero Hedge: 

• Greek Consumers Most Pessimistic On Earth: 40% Have No Disposable Income. 

• Japan Refuses To Exit Triple-Dip Recession As Q4 GDP Disappoints Expectations Of A Positive Print. (graph)

• Six More Equity Offerings Price After The Close As The Greater Fools Start Getting Second Thoughts.

• Meet Stingray Surveillance: The "Unconstitutional, All-You-Can-Eat Data Buffet".

Business Insider:

• Warren Buffett's Favorite Valuation Metric Has Breached The 100% Level. (graph)

• CITI(C): Stock Market Sentiment Is Perilously Close To All-Out Euphoria. (graph)

• Navy SEAL Chris Kyle Had A Funeral Procession Fit For A Head Of State [VIDEO].

• ACKMAN: 'If The FTC Misses Herbalife(HLF) It's The Equivalent Of The SEC Missing Madoff'.

• CITI(C): OPEC's Days Look Numbered.

NY Times:

• Seeking Growth, Nurses’ Union Links to Teachers’ Union. One of the nation’s largest nurses’ unions — the National Federation of Nurses — plans to announce on Thursday that it will affiliate with the far larger American Federation of Teachers. Barbara Crane, the president of the nurses’ federation, said her group’s national board voted to join forces with the teachers’ union to give the nurses more political clout and money to try to unionize more nurses.

Reuters: 

• MetLife(MET) profit falls on derivative losses; operating profit beats. MetLife Inc reported a 90 percent fall in quarterly profit on derivative losses linked to its credit spreads but the largest U.S. life insurer's operating profit beat estimates. MetLife, heavily exposed to persistently low interest rates, has long had a substantial derivatives program designed to smooth out that risk. But higher interest rates, foreign currency changes and impact of the company's credit spreads resulted in derivative net losses of $924 million, after tax, in the quarter. The company recorded derivative net gains of $351 million a year earlier.

• Whole Foods(WFM) store sales soften, shares fall. Whole Foods Market Inc, the largest U.S. natural and organic grocery chain, said on Wednesday that sales at established stores so far this quarter softened from the prior period and its shares fell 6.1 percent after the close. 

• Cisco(CSCO) results beat Street; CEO sees challenge in Europe. Cisco Systems Inc's quarterly results topped Wall Street views on Wednesday amid early signs tech spending was on the mend, but CEO John Chambers warned the picture was mixed and parts of Europe remained challenging. The company's shares were down 1.7 pct in after hours trading after Cisco reported that revenue growth in Europe - which accounts for a quarter of its business - was down 5 percent.

• Weight Watchers(WTW) forecasts weak full-year earnings; shares fall. Weight Watchers International Inc forecast full-year earnings below Wall Street expectations as attendance at its diet meetings remained low so far this year, sending its shares down more than 15 percent after the bell. 

• Engineers union files complaint, accuses Boeing(BA) of intimidation. A union representing engineers and technical workers at Boeing Co filed a complaint with the National Labor Relations Board accusing the airplane maker's security personnel of stopping union members from distributing leaflets on a labor contract ballot at the Everett factory. 

• Pressure builds for Keystone decision after Obama speech. Environmentalists and industry groups ramped up efforts on Wednesday to influence the White House's decision on the Keystone XL pipeline project, a day after President Barack Obama said he would take action to curb climate-warming emissions. 

• Applied Materials(AMAT) forecasts strong quarter as orders pick up. Applied Materials Inc, the world's largest chip gear maker, posted better-than-expected quarterly results driven by the popularity of smartphones and tablets, and forecast earnings ahead of analysts' estimates for the current quarter. 

• Nvidia(NVDA) revenue outlook misses, PC and tablet chips slow. Nvidia gave a revenue outlook for the current quarter that missed expectations, pointing to a slowing PC industry and slower production of tablets using its chips ahead of the release of newer models.

• Obama Medicare rebate plan could hurt drug companies. President Barack Obama's decision to spotlight drug rebates as a way to save money on Medicare is likely to be opposed by the pharmaceutical industry, which could potentially lose billions of dollars in profits.

Financial Times:

• US authorities widen SAC Capital probe. US authorities are expanding their investigation into potential insider trading involving SAC Capital , the $14bn hedge fund, to include more stocks than previously identified, people familiar with the matter said. The probe by the Federal Bureau of Investigation and the US attorney’s office in Manhattan has widened to include at least four and as many as six more stocks, these people said. 

Telegraph:

• In the last three years UK inflation has eroded a decade of economic growth, and worse is to come.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.25%  to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 111.0 -.5 basis point.

• Asia Pacific Sovereign CDS Index 85.50 -1.0 basis point.

• FTSE-100 futures +.07%.

• S&P 500 futures +.03%.

• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALXN)/.53

• (REGN)/1.37

• (JAH)/1.26

• (CAB)/1.21

• (BWA)/1.14

• (VMC)/-.12

• (PEP)/1.05

• (DISCA)/.76

• (APA)/2.29

• (A)/.67

• (TAP)/.64

• (SPW)/1.56

• (GM)/.51

• (DTV)/1.15

• (STRA)/1.44 

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to fall to 360K versus 366K the prior week.

• Continuing Claims are estimated to fall to 3205K versus 3224K prior. 

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bullard speaking, G-20 Meeting, China FDI, BoJ decision, 30Y T-Note auction, weekly EIA natural gas inventory report, Bloomberg Feb. US Economic Survey, weekly Bloomberg Consumer Comfort Index, (JDSU) analyst day, (TEN) analyst meeting and the (OI) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial 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 50% net long heading into the day.