Late-Night Headlines
Bloomberg:
- European Union leaders are failing to persuade bond investors that Greece can fix its budget. The yield on Greece two-year notes have remained above 5 percent, the highest in the euro zone, even after officials urged the nation this week to reduce its deficit. The premium investors demand to hold the notes instead of benchmark German securities has held above 4 percentage points, the most since the Mediterranean nation joined the euro and more than 10 times its 35 basis point average the past decade. After driving yields to the highest in 10 years, bond investors are keeping up the pressure on the EU to support Greece. Concern that the nation’s inability to narrow a deficit that is more than four times the EU limit will be replicated in countries such as Portugal and Spain prompted Societe Generale SA’s top-ranked strategist Albert Edwards to predict Feb. 12 that the euro region was poised to break up. “The market has replaced the EU as the chief enforcer of fiscal discipline, and the movement in spreads is testament to that,” said Charles Diebel, senior interest-rate strategist at Nomura International Plc in London. “What the bond markets have done to Greece could be the salvation of Europe.” “The experience of the past 10 years shows that markets can be ignoring these issues totally until they suddenly wake up and turn violently against fiscal offenders,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “Market discipline is important and necessary, but sudden shifts in sentiment in the bond market can be equally devastating.”
- Gold declined for a second day after the International Monetary Fund said it would begin selling some of its reserves on the open market, raising concern that supply will increase. Gold for immediate delivery, which fell 1.1 percent yesterday after the IMF’s announcement, dropped 0.6 percent to $1,100.55 an ounce at 8:40 a.m. in Singapore. Bullion for April delivery weakened 1.7 percent to $1,101.20 an ounce in New York. “The IMF sale plan is weighing on the gold market as the supply increases when demand isn’t very robust,” said Park Hyun Sun, a trader with Eugene Investment & Futures Co. in Seoul.
- The Bank of Japan refrained from expanding its lending and asset-purchase programs today, preserving policy ammunition in case deflation deepens and the government increases pressure for more action. The policy board kept the loan facility for commercial banks and monthly purchases of government bonds unchanged, the central bank said in a statement in Tokyo. It also maintained the benchmark interest rate at 0.1 percent in a unanimous vote.
- BofA's(BAC) New Settlement With SEC Smell Even Worse: Jonathan Weil.
- Senate Republicans led by Richard Shelby are drafting an alternative to financial-regulation legislation that Senator Christopher Dodd is developing after bipartisan talks collapsed this month, two Shelby aides said. Shelby’s plan will likely aim to create a consumer protection unit within a new bank regulator instead of the standalone agency sought by Dodd and President Barack Obama, said the aides, who requested anonymity because the talks are private. It would shield taxpayers from costs of unwinding systemically important failed financial firms, the aides said. Shelby “genuinely believes that some of the Democratic positions that he’s been looking at are too extreme,” Gilbert Schwartz, a former Federal Reserve attorney and a partner at Washington law firm Schwartz & Ballen LLP, said today in a phone interview. “He is trying to come up with a reasonable compromise that could attract senators from both sides of the aisle.”
- China may let its currency appreciate by 5 percent as early as next month to prevent economic growth from stoking inflation, according to Stephen Jen of BlueGold Capital Management LLP. Policy makers may also raise interest rates this year to cool an economy that expanded by 10.7 percent in the fourth quarter, the fastest increase in two years, Jen said in an interview this week. The central bank last week ordered lenders to boost the amount of cash they must put aside as reserves for the second time this year in an attempt to curb growth in loans. “China is taking steps in the right direction, but the policies so far aren’t adequate,” said Jen, who helps to oversee about $1.5 billion as a managing director at BlueGold in London. “It will require a multi faceted policy approach to deal with such a big, and sometimes volatile, economy. We expect rate hikes, and we expect a policy change” on the yuan.
Wall Street Journal:
- Consensus or Con? The global warmists are the real deniers. This column was scoffing at global warming back when global warming was still cool. But even we have been surprised at the extent of the past three months' "meltdown" of global warmism, to use the metaphor that everyone seems to have settled on. As we've written on various occasions, we didn't know enough about the substance of the underlying science to make a judgment about it. But we know enough about science itself to recognize that the popular rendition of global warmism--dogmatic, doctrinaire and scornful of skepticism--is not the least bit scientific. The revelations in the Climategate emails show that these attitudes were common among actual scientists, not just the popularizers of their work. Still, we would not have gone so far as to say that global warming was just a hoax. Surely there was some actual science to back it, even if there was a lot less certainty than was claimed. Now, though, we're wondering if this was too charitable a view. London's Sunday Times reports that scientists are "casting doubt" on the Intergovernmental Panel on Climate Change's "claim that global temperatures are rising inexorably because of human pollution," a claim the IPCC describes as "unequivocal":
- Zhang Yesui, currently the head of China's United Nations mission, will become the country's new ambassador to the U.S., putting a non-U.S. specialist in the post amid rising bilateral tensions. Mr. Zhang, 56 years old, will take over the position in mid-March, said people familiar with the situation, replacing Ambassador Zhou Wenzhong, who spent much of his career focused on American affairs. Mr. Zhang has spent much of his career dealing with international issues and isn't widely known in Washington. People who have dealt with him describe him as a sophisticated, nuanced diplomat who has effectively represented China's interests at the U.N.
- A new type of nuclear reactor—smaller than a rail car and one tenth the cost of a big plant—is emerging as a contender to reshape the nation's resurgent nuclear power industry. Three big utilities, Tennessee Valley Authority, First Energy Corp. and Oglethorpe Power Corp., on Wednesday signed an agreement with McDermott International Inc.'s Babcock & Wilcox subsidiary, committing to get the new reactor approved for commercial use in the U.S. Although none have agreed to buy a reactor, the utilities' commitment should help build momentum behind the technology and hasten its adoption across the industry. It's a crucial first step toward getting the reactor design certified by the Nuclear Regulatory Commission. Early support from the three utilities, and four others that are mulling the agreement, increases the odds that customers will come forward in the future.
- Muni Threat: Cities Weigh Chapter 9.
MarketWatch.com:
CNBC:
Business Insider:
zerohedge:
- Presenting Total Bank Assets As A Percentage Of Host Countries' GDP.
Politico:
- In January, with White House officials privately slamming Democratic Senatorial Campaign Committee Chairman Bob Menendez for bungling away Ted Kennedy’s Senate seat, Chuck Schumer rose to his colleague’s defense during a closed-door Democratic lunch. “Bob Menendez is running the DSCC during a very difficult time a more difficult time than when I was running it,” Schumer told the shell-shocked Democratic caucus, according to a person in the room. “We all ought to get behind him and realize it’s not 2006 or 2008.” That Schumer felt compelled to take the extraordinary step of defending his successor showed just how fast Menendez’s stock has fallen following a series of devastating setbacks, culminating with this week’s surprise retirement announcement by Sen. Evan Bayh (D-Ind.).
Rasmussen Reports:
Washington Examiner:
Reuters:
- Applied Materials Inc (AMAT), the world's largest producer of chip-making gear, posted a profit on Wednesday and boosted its forecast for sales in fiscal 2010 as it expected increased demand, sending its shares higher in after-market trading. The company also forecast second-quarter profits that topped Wall Street analysts' estimates. Applied Materials gave an upbeat business outlook for the full year, saying it expected its Silicon Systems Group sales to more than double during that period. Customers were also discussing plans for new chipmaking plants, which could lead to increased equipment spending in 2011, Chief Executive Mike Splinter said.
- Hewlett-Packard Co (HPQ) posted better-than-expected results on strong server and personal computer sales and a resurgence in its printing business, and the company raised its full-year outlook. Analysts say HP is well-positioned to benefit from an expected surge in enterprise technology spending in 2010, as businesses replace aging equipment. The company said the so-called refresh cycle is underway, with more strength anticipated in the back half of the year.
Financial Times:
- Billions of euros spent by European governments to prop up failing companies in the hope of saving jobs may have been misdirected, an EU-commissioned report is suggesting. A two-year study by the Oxera consulting firm for competition officials at the European Commission has found that survival rates for “distressed firms” may be lower when they receive government bail-outs than if they are not aided. It also challenges the EU policy assumption that restructuring aid necessarily saves “jobs and activities which would otherwise disappear”. The findings come at a time when general economic difficulties could bolster the desire of many EU governments to bail out companies and sectors. The report – which was commissioned before the financial crisis struck – could encourage EU competition officials, who must vet state aid applications, to target assistance more carefully and question some of the “job-saving” justifications put forward by member state governments. The study may help the commission as part of a move towards a refined economic approach to state aid, and towards “less and better-targeted aid”, said Luis Correia da Silva, Oxera’s managing director.
- China Investment Corp, Beijing’s sovereign wealth fund, has agreed to invest $1.5bn in the private equity secondary market through custom accounts with three of the biggest specialists in buying second-hand buy-out and venture capital fund interests. Lexington Partners, Goldman Sachs(GS) and Pantheon Ventures have each agreed to manage $500m for CIC through special accounts, which are to be kept separate from their main funds, according to people familiar with the agreements. The move is the biggest injection of capital into the secondary market. It underlines how CIC is using its size to win special terms from private equity groups, including lower fees and transfer of knowledge on specialist markets.
- Steven Chu, the Nobel prize-winning physicist, is fast discovering that science is not enough when it comes to winning the climate change debate in Washington. A year after President Barack Obama appointed the mild-mannered Stanford academic as energy secretary, Mr Chu is struggling to convince an increasingly partisan Congress that the US cannot afford to delay far-reaching reforms, from nuclear policy to reducing carbon emissions. “We’re in a crazy never-never land situation,” he said, describing how companies were not making investments and banks were not supplying loans because of the uncertainty about when, or whether, a cap on carbon would be imposed. “Let’s recognize that we’re postponing an inevitability.” Mr Obama has been pushing for a new law that would impose limits on US carbon emissions and set up a trading scheme through which large polluters would have to buy permits to emit more. The legislation is part of his campaign pledge to make the US a more responsible global citizen by cutting emissions, while creating high-tech jobs. The House passed a version of a climate-change bill last summer, but the Senate has been dragging its heels. The most damaging has been the “Climategate” incident in which scientists from East Anglia University in the UK were accused of burying evidence that did not support their claims about global warming. But Mr Chu said there was no cause for equivocation. “The public polls go up and down, with Climategate and all these other things. But if you step back and dispassionately look at it, this is a little wart on the overall amount of information.” The administration remained committed to passing a comprehensive energy and cap-and-trade bill, he said. “I’m here because I think we can do this.”
Evening Recommendations
Citigroup:
- Reiterated Buy on (PCLN), target $275.
Night Trading
Asian indices are -.50% to unch. on avg.
S&P 500 futures -.22%.
NASDAQ 100 futures -.14%.
Morning Preview
BNO Breaking Global News of Note
Yahoo Most Popular Biz Stories
MarketWatch Pre-market Commentary
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar
Who’s Speaking?
Upgrades/Downgrades
Politico Headlines
Rasmussen Reports Polling
Earnings of Note
Company/Estimate
- (B)/.21
- (GT)/-.09
- (MGM)/-.14
- (WMB)/.34
- (WCG)/.45
- (WMT)/1.12
- (APA)/1.97
- (RS)/1.02
- (CPKI)/.17
- (RRGB)/.15
- (WBMD)/.22
- (FSLR)/1.51
- (IM)/.52
- (BUCY)/.91
- (CBS)/.25
- (INTU)/.31
- (DELL)/.26
- (TRA)/.54
- (DTV)/.42
Economic Releases
8:30 am EST
- The Producer Price Index for January is estimated to rise +.8% versus a +.2% gain in December.
- The PPI Ex Food & Energy for January is estimated to rise +.1% versus unch. in December.
- Initial Jobless Claims for last week are estimated to fall to 438K versus 440K the prior week.
- Continuing Claims are estimated to fall to 4500K versus 4538K prior.
10:00 am EST
- The Philadelphia Fed Index for February is estimated to rise to 17.0 versus a reading of 15.2 in January.
- Leading Indicators for January are estimated to rise +.5% versus a +1.1% gain in December.
11:00 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,725,000 barrels versus a +2,424,000 barrel increase the prior week. Gasoline supplies are estimated to rise by +1,500,000 barrels versus a +2,324,000 barrel gain the prior week. Distillate inventories are estimated to fall by -1,500,000 barrels versus a -356,000 barrel decline the prior week. Refinery Utilization is expected to rise by +.19% versus a +1.41% gain the prior week. Finally, natural gas inventories are estimated to fall -190 bcf versus a -191 bcf decline the prior week.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Duke speaking, Fed's Lockhart speaking, Fed's Bullard speaking, (ADP) analyst meeting, (VDSI) analyst meeting, (CECO) analyst day, (CR) analyst conference, (AIV) investor day, Oppenheimer Semi Summit and the Barclays Industrial Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.