Today's Headlines

Bloomberg:

• Portugal's Debt Rating Lowered by Fitch on Finances. Portugal’s credit grade was cut by Fitch Ratings for the first time, underscoring growing concern that Europe’s weakest economies will struggle to meet their debt commitments as finances deteriorate. The rating was lowered one step to AA- with a “negative” outlook, Fitch said in a statement today, adding that further economic or fiscal underperformance this year or in 2011 may lead to another downgrade. “A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal’s creditworthiness,” Douglas Renwick, associate director at Fitch, wrote in the statement from London. “Although Portugal has not been disproportionately affected by the global downturn, prospects for economic recovery are weaker than 15 European Union peers, which will put pressure on its public finances over the medium term.” The cost of protecting against losses on Portugal’s sovereign debt rose to the highest in almost a month, according to CMA DataVision prices for credit-default swaps. Five-year contracts insuring $10 million of bonds increased $6,000 a year to $140,000. The Portuguese and Greek economies may face a “slow death” as they dedicate a higher proportion of wealth to paying off debt and investors drive up government borrowing costs, Moody’s said on Jan. 13. While the two countries can still avoid such a scenario, their window of opportunity “will not be open indefinitely,” Moody’s said.
  
• U.S. Economy: Durable Goods Orders Climb, Home Sales Decline. Orders for durable goods rose in February for a third month and new-home sales fell to the lowest on record, indicating manufacturing will stay at the forefront of the economic recovery. The 0.5 percent increase in bookings for long-lasting goods followed a 3.9 percent surge the prior month, the Commerce Department said today in Washington. Excluding transportation equipment, orders advanced more than anticipated. Sales of new homes fell 2.2 percent to an annual pace of 308,000 in February, the Commerce Department reported. Blizzards, unemployment and foreclosures combined to produce the fewest sales of houses last month since record- keeping began in 1963. Treasury Secretary Timothy F. Geithner yesterday said it would take a “long time” to repair the housing market. The supply of homes at the current sales rate increased to 9.2 months’ worth, the highest since May, from 8.9 months. The median price of a new home in the U.S. increased 5.2 percent to $220,500 in February from a year earlier. The advance was the largest since September 2007. Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, increased 1.1 percent after dropping 3.9 percent the prior month. Shipments of those items, used in calculating gross domestic product, climbed 0.8 percent after a 1.9 percent decrease.
• Greece to Default 'At Some Point,' UBS's Donovan Says. Greece will default on its bonds “at some point” as the euro region fails to deal with its first major economic crisis, said Paul Donovan, deputy head of global economics at UBS Investment Bank. “I think it’s in an impossible situation,” said Donovan, who is based in London, in an interview with Bloomberg Radio today. “Europe has failed to clear its first serious hurdle. If Europe can’t solve a small problem like this, how on earth is it going to solve the larger problem, which is the euro doesn’t work. It’s a bad idea.” Columbia University Professor Charles Calomiris said it’s not “inevitable” Greece will default even though it needs to cut government spending by 25 percent. “A 25 percent reduction is something I’ve never seen in any country,” Calomiris said. “It would require a huge lift.”
• Blanchflower Says UK AAA Loss May Not Be Monumental. Britain might not face as “monumental” a situation as people assume if the nation were to lose its top AAA credit rating, former Bank of England policy maker David Blanchflower said. “We have to be concerned about that, but no one has well- enumerated what it would actually mean if we did,” he said in an interview with Bloomberg Television yesterday. “I’m not so sure it would actually be quite as monumental.” Former finance minister Norman Lamont said today “it’s a risk” that Britain loses the top ratings grade because the nation’s tax take may not be enough to cover the cost of borrowing. The public finances are too tight to allow Darling to increase spending, he said. “We are getting near to a situation where receipts are not necessarily going to be adequate for paying the debt interest,” Lamont said on Bloomberg Television. “It’s crystal clear that Alistair Darling doesn’t have any room for maneuver.”
• Big Banks Begin Effort to Improve Image, Set 'Record Straight'. One of Wall Street’s main lobbying groups is starting an image-improvement campaign aimed at showing the financial industry as trustworthy and a positive force after more than a year of being chastised in Washington. The board of the Financial Services Roundtable, which represents the 150 largest banks and insurance companies in the U.S., discussed the effort last week at a meeting in New York. The public relations campaign, which will come to fruition as the mid-term election season heats up, is being led by three firms: public relations specialists APCO Worldwide, pollster Luntz Maslansky Strategic Research and DDB, an advertising agency owned by New York-based Omnicom Group Inc.
• Treasuries Tumble as Five-Year Note Auction Draws Weak Demand. Treasuries dropped as the record- tying $42 billion auction of five-year notes drew the lowest demand from a group of investors that includes foreign central banks since July. Yields on current five-year notes rose the most since August and the 10-year note’s yield increased to the highest level in more than two months. U.S. interest rate swap spreads plunged to the lowest levels in more than two decades after Fitch Ratings’s downgrade of Portugal raised the risk of owning sovereign debt and corporate bond issuance surged.

Wall Street Journal:

• Tax-Break Battle Flares. J.P. Morgan(JPM) in Talks for $1.4 Billion; Stimulus Gives $12 Billion to 250 Firms. J.P. Morgan Chase & Co. is nearing a deal that would allow it to benefit from a tax refund of as much as $1.4 billion, becoming the latest company to tap a little-noticed plank in an economic stimulus bill.
• Google's(GOOG) Brin Talks About China Gamble.
  

BusinessWeek:

• Oil Falls on Bigger-Than-Forecast Supply Gain, Surging Dollar. Crude oil fell after a government report showed a bigger-than-forecast increase in U.S. supplies and as the dollar surged to a 10-month high against the euro. “The crude number was a lot bigger than what was expected,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “There hasn’t been much attention paid to the fundamentals lately. The market has been more focused on what happens to the dollar and equities.”
• Gold Tumbles to Five-Week Low as Stronger Dollar Curbs Demand. The dollar rose to a 10-month high against the euro after French and German leaders said an aid plan for Greece must give a role to the International Monetary Fund, and as Fitch Ratings lowered Portugal’s credit rating. The actions renewed concern that Greece’s fiscal crisis may spread. “You have investors talking about the euro going to parity,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “It’s very hard for the metals to hold up in that environment.” “The crisis in the Old World shows no signs of letting up,” said Jon Nadler, a Kitco Inc. analyst in Montreal. Fitch’s Portugal downgrade provides a “stark reminder that the region’s fiscal problems are clearly not confined to just Greece.” The euro will fall 25 percent to parity with the dollar, Gary Shilling, an economist and the president of A. Gary Shilling & Co., said today in a Bloomberg Television interview. He said Spain may develop the region’s next fiscal crisis. “Uncertainty looms and a potential disagreement on further action within euro-zone policymakers could add selling pressure to the euro,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report. That may “pull gold prices lower.”
• Euro May Fall 3.2% Versus Dollar on Charts: Technical Analysis. The euro may fall about 3.2 percent against the dollar by the end of next week after the currency dropped through a so-called support level, according to Mitsubishi UFJ Securities Co. in Tokyo. “Technically, a break of the previous support will accelerate the euro selling,” Shioiri said in an interview. “There seems to be a bigger downside risk for the euro now.”
• Businesses Want Apple's iPad, Too. Business demand for the iPad may be greater than expected. Companies and workers are buying the tablet to use it for communications and mobile productivity.

NY Post:

• Bloomberg's Budget Ax Draws Fresh Blood. With Albany's budget crisis smoldering, Mayor Bloomberg yesterday ordered a new round of devastating city cuts totaling $1.3 billion to prepare for a potential massive reduction in state aid. "By no means do I see a scenario where significant head-count reductions wouldn't be part of the answer," warned Deputy Mayor Ed Skyler, speaking of layoffs. "This is a very serious situation and we are highly concerned about it and its impact on the city." Skyler didn't put a number on potential layoffs, but in January the mayor had said it could be as high as 19,000.
• SEC's Porn Again. Staff Spent Hours Surfing Sexxxy Sites at Work. So that's what they were doing instead of watching out for fraudsters like Bernie Madoff.

Business Insider:

• The 20 Hedge Fund Superstars Hidden Inside JPMorgan.

Washington Times:

• Cyber-Attack on U.S. Firms, Google(GOOG) Traced to Chinese. The cyber-attack on Google and other U.S. companies was part of a suspected Chinese government operation launched last year that used human intelligence techniques and high-technology to steal corporate secrets, according to U.S. government and private-sector cybersecurity specialists. More worrying, however, is the likelihood that the cyber-attacks that led Google this week to end its cooperation with Beijing-controlled censorship and move its search engine service to Hong Kong included planting undetectable software on American company networks that could allow further clandestine access or even total control of computers in the future.

LA Times:

• Big Companies are Awash in Cash as Economy Picks Up.

USA Today:

• App Developers are Gearing up for Apple's iPad. For Scott Lahman, Apple's soon-to-launch iPad tablet computer could be the next big thing. Really. His company, Gogii, produces the TextPlus app for the iPhone, which lets folks send text messages free, bypassing the phone network. It has been downloaded more than 5 million times.

Reuters:

• China's Assertive Policies Raise Investment Concerns. China's yuan stance is just part of a tide of assertive policies from Beijing that have unsettled American companies and risk stoking tensions, said the senior executive of a major U.S. business group. Myron Brilliant, senior vice president for international affairs at the U.S. Chamber of Commerce, told Reuters on Wednesday that China's campaign to encourage homegrown technology was also raising fears in the United States that foreign investors were being edged out. Strains between Washington and Beijing over currency, trade, technology policy and other economic issues are manageable, but could take a more volatile turn if both sides do not open up more frank discussion, said Brilliant.

Helsingin Sanomat:

• European Union Monetary Commissioner Olli Rehn said the Greek crisis may threaten the euro. "Greece may cause a severe hindrance to the euro, or then we may learn from the crisis," Rehn said.

Folha de S. Paulo:

• Petroleo Brasileiro SA will start commercial oil production at the offshore Tupi field, in the pre-salt region, in October, citing the company's Director of Exploration and Production Guilherme Estrella. The company initially expected to start output in Tupi in December or January of 2011. Production at Tupi is estimated at 100,000 barrels a day.

Bear Radar

Style Underperformer:
Small-Cap Growth (-.83%)

Sector Underperformers:
Gold (-3.37%), Hospitals (-2.37%) and Semis (-2.06%)

Stocks Falling on Unusual Volume:
CMC, CHU, IAG, STD, TKC, STO, BK, MDTH, GENZ, NICE, SONC, DRWI, NTES, ENDP, ACGY, SOHU, LFUS, XLNX, NETC, EZCH, LPNT, RICK, ASIA, ESE, JBL and RBN

Stocks With Unusual Put Option Activity:
1) SYMC 2) ADBE 3) SINA 4) MBI 5) YHOO

Bull Radar

Style Outperformer:
Large-Cap Value (-.24%)

Sector Outperformers:
REITs (+.46%), Banks (+.35%) and Homebuilders (+.28%)

Stocks Rising on Unusual Volume:
RDN, LVS, CLF, CTEL, BAC, ADBE, PLCM, BRKR, CAGC, TGI and LEN

Stocks With Unusual Call Option Activity:
1) RDN 2) GENZ 3) CPN 4) MTG 5) S

Wednesday Watch

Evening Headlines
Bloomberg:

• Euro Falls to 3-Week Low Against Dollar on Greece Uncertainty. The euro fell to a three-week low against the dollar after French and German leaders said any aid package for Greece would require help from the International Monetary Fund, damping demand for the common currency. “It looks like the eurozone can’t resolve the Greek crisis by themselves so they are going to the IMF for help,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. “This casts some doubt over the strength of the European Union. The bias is to sell the euro.” “Given strong opposition for any aid among German citizens, key EU members are unlikely to extend support for Greece,” said Hirokata Kusaba, a senior economist in Tokyo at Mizuho Research Institute Ltd., a unit of Japan’s second- largest banking group. “The euro will continue to weaken.”
  
• AK Steel(AKS) Sees $31 Million Charge From New Health Law. AK Steel Holding Corp., the third largest U.S. steelmaker by sales, said it will record a non-cash charge of about $31 million resulting from the health-care overhaul signed into law by President Barack Obama. The charge, to be recorded in the first quarter of 2010, is due to a reduction in the value of the company’s deferred tax asset because of a change to the treatment of Medicare Part D reimbursements under the new law, West Chester, Ohio-based AK Steel said in a statement today. The almost $1 trillion overhaul signed today, called the Patient Protection and Affordable Care Act, was opposed by some U.S. businesses that said the measure would raise their costs. Caterpillar Inc., the world’s largest maker of construction equipment, last week said taxes and “new-coverage mandates” would raise its health-care costs by 20 percent, or more than $100 million in the first year. AK Steel and other companies that had been receiving a federal subsidy for offering retiree drug benefits are going to have that payment taxed under the new law, Alan McCoy, a spokesman for AK Steel, said in an interview today. In the past, the businesses received the money from the government tax-free because they were saving Medicare money and covering the part of prescription drug costs that the federal insurance plan for the elderly wasn’t. Erin DiPietro, a spokeswoman for Pittsburgh-based U.S. Steel(X), said information was not immediately available on how the new health law would affect the company financially.
• Wall Street Despised in Poll Showing Majority Want Regulation. Americans are leery about creating a new federal agency to make consumer-protection rules for mortgages and credit cards and would prefer to enhance the existing powers of banking regulators. Most people interviewed in the Bloomberg National Poll say they don’t like Wall Street, banks or insurance companies and favor letting the government punish bankers who helped cause the worst financial crisis since the Great Depression. Almost seven out of 10 people surveyed support using current bank regulators for consumer protection, backing positions held by the financial industry and Republicans over President Barack Obama’s proposal to establish an independent agency. “People are generally satisfied with the way consumer protection has worked with banks,” said Ernie Patrikis, a partner specializing in banking supervision at the White & Case LLP law firm in New York. “Most Americans could care less about redoing the financial regulatory structure.” 57 percent of Americans have a mostly unfavorable or very unfavorable view of Wall Street, versus fewer than one-quarter who have a favorable opinion. Banks are viewed badly by 54 percent of poll respondents, and 60 percent have a negative opinion of insurance companies. The poll also shows most Americans don’t like the nation’s top corporate bosses. Almost two-thirds say they have an unfavorable opinion of business executives, a rating that rivals the public’s disdain for Congress, which was viewed with disfavor by 67 percent of respondents. Fifty-six percent of those polled say they would support government action to limit compensation of those who helped cause the financial crisis, or to ban those people from working in the banking industry. As Democrats and Republicans seek to tap populist ire, the poll shows there may be political advantage in taking on big financial institutions such as Charlotte, North Carolina-based Bank of America Corp., and New York’s Goldman Sachs Group Inc. The majority of poll participants -- 56 percent -- say big financial companies are more interested in enriching themselves at the expense of ordinary people, while 40 percent say such firms play a vital role in enabling the economy to grow. More than 40 percent of Americans say the government has gone too far in measures to fix the financial industry; 37 percent say it hasn’t done enough. Almost six out of 10 people say Wall Street hasn’t gone far enough on its own to protect against future emergencies. “Anything the government gets their fingers in, they mess it up,” said poll participant Norman White, 60, a community college electronics instructor who lives in Colfax, Louisiana. “I don’t have a very high opinion of the government running anything.”
• White House Inflates Success of Loan Program, Watchdog Says. The Obama administration is inflating the success of its main foreclosure prevention program, which may end up doing more harm than good by “spreading out the foreclosure crisis” over several years, according to federal investigators. “A year into the program, although more than a million trial modifications have been initiated, the number of permanent modifications thus far, 168,708, has been, even according to Treasury, ‘disappointing,’” according to a report by a government watchdog obtained by Bloomberg News. “The program will not be a long-term success if large amounts of borrowers simply re-default and end up facing foreclosure anyway.” While Treasury officials still publicly proclaim the Home Affordable Modification Program, or HAMP, will help 3 million to 4 million borrowers, internally they project that about half that number will receive permanent alterations to their loan terms, the Special Inspector General for the Troubled Asset Relief Program wrote in the report. The findings are scheduled to be released at a hearing before the U.S. House Committee on Oversight and Government Reform March 25. The report echoes criticisms in a March 16 letter to Treasury Secretary Timothy Geithner from Republican committee members Darrell Issa of California and Jim Jordan of Ohio. They said the administration was “glossing over disappointing results” by counting temporary changes toward the goal of permanent relief.
• Investors are withdrawing from money-market funds at the fastest pace in at least two decades, reducing holding that peaked at $3.9 trillion in January 2009. "The draining of cash from money-market funds shows people are becoming more comfortable taking risk, so equities are going up and bonds are also being well supported and the yield curve is flattening," said Christian Carrillo, a senior interest-rate strategist in Tokyo at Societe Generale SA. "Such behavior can give some comfort to the Fed that it's okay to reduce the size of its balance sheet, which is a pre-requisite for rate hikes."
  
• CFTC Needs to Expand Metal Rules, Commissioner Says. The U.S. Commodity Futures Trading Commission needs “professional-grade” regulations for metal markets including gold and silver, according to Commissioner Bart Chilton. “We need to have rational free markets and need to control and ensure that there’s no excess speculation and no excess concentration in markets,” Chilton said today on a conference call with investors that was monitored by reporters. “We need to have professional-grade regulatory tools” for metal-futures trading, he said. The agency, which oversees $5 trillion in daily trading, will hold a public meeting on March 25 to consider limits on trading positions in metals as part of a plan to prevent anyone or any firm from gaining too much control of a commodity market. The commission “drastically” needs the limits to keep speculators from “contorting” markets, Chilton said.
• AIG(AIG) Increases Compensation for Most Top Managers. American International Group Inc., the bailed-out insurer, was allowed by U.S. paymaster Kenneth Feinberg to increase 2010 compensation for most top executives in a group that had their pay slashed last year.
• NFL Owners Change Overtime Rule During Playoffs.
• Corzine Returns to Wall Street as CEO of MF Global(MF). Former New Jersey Governor Jon Corzine, who ran Goldman Sachs Group Inc. from 1994 to 1999, has accepted offers to lead the futures and options broker MF Global Holdings Ltd. and become an operating partner of buyout firm J.C. Flowers & Co. Corzine, 63, becomes chairman and chief executive officer immediately, MF Global said in a statement today. He takes over from Bernard W. Dan, 50, who is leaving for personal reasons and will stay until May 16 to aid in Corzine’s transition, the New York-based company said. MF Global shares gained as much as 13 percent in after-market trading.
• Netanyahu Says Housing Rift Could Delay Talks by Year. U.S. acceptance of Palestinian demands that Israel halt construction in east Jerusalem could put Middle East peace talks on hold for a year, Israeli Prime Minister Benjamin Netanyahu said. “For 42 years we have been building in the Jewish neighborhoods of Jerusalem. No one argued about it,” Netanyahu said at a meeting today with U.S. House Speaker Nancy Pelosi, according to his spokesman, Nir Hefez. “This was never raised as a point of contention between us and the U.S.,” Netanyahu said. “The Palestinians are now raising a new demand. If this demand is adopted we are liable to lose another year.”
• Adobe(ADBE) Sales Forecast Signals Likely Software Upgrade. Adobe Systems Inc., the world’s biggest maker of graphic-design programs, forecast sales that beat analysts’ estimates, a sign the company is poised to release an upgrade of its most profitable software. The shares gained.
• Nintendo Shares Gain on Plan for Glasses-Free 3-D DS.

Wall Street Journal:

• Schumer Threatens Retaliation in EU Hedge-Fund Dispute. A U.S. senator threatened retaliation if European Union proposals curbing access of American fund managers to the European market become law. In a sign that a European effort to increase regulation of hedge funds and other alternative-investment vehicles could escalate into a broader trans-Atlantic dispute, Sen. Charles Schumer (D., N.Y.) described the European proposals as "protectionist rules that discriminate against U.S. firms and activities." In a letter to Treasury Secretary Timothy Geithner, Mr. Schumer said he stands ready to call on Congress to pass legislation that would prohibit funds not based in the U.S. from marketing and raising money in the U.S. It also would require funds operating in the U.S. to use custodian banks based in the U.S.

BusinessWeek.com:

• The 50 Most Powerful People in U.S. Real Estate.

Business Insider:

• Look How Fast China's Workforce Is Going To Turn Grey.

zerohedge:

• GMO's Edward Chancellor Discusses China's Red Flags - A Must Read For A Fresh Perspective On China's Bubble.
• Battle For The Budget. Recently the Congressional Budget Office published its scoring of President Obama's budget for the next 10 years. It shows a budget deficit of $9.8 trillion. That is just shy of $4 trillion worse than the CBO's baseline budget, a budget that includes only the laws as currently enacted, with no estimates of any new programs lawmakers may add that worsen future projections.
  

Rasmussen Reports:

• Republican candidates now hold an eight-point lead over Democrats in the latest edition of the Generic Congressional Ballot. A new Rasmussen Reports national telephone survey finds that 43% would vote for their district’s Republican congressional candidate while 35% would opt for his or her Democratic opponent.

Politico:

• Health Bill May Exempt Top Hill Staffers. The health care reform bill signed into law by President Barack Obama Tuesday requires members of Congress and their office staffs to buy insurance through the state-run exchanges it creates – but it may exempt staffers who work for congressional committees or for party leaders in the House and Senate. Staffers and members on both sides of the aisle call it an “inequity” and an “outrage” – a loophole that exempts the staffers most involved in writing and passing the bill from one of its key requirements.

Financial Times:

• Global Derivatives Disclosure to Rise. A transatlantic row that flared up in the wake of the Greek debt crisis over the lack of disclosure to regulators of credit market activity has pushed the new body in charge of collecting global trading data to provide more information to financial watchdogs. Regulators from around the globe including the Securities and Exchange Commission will now be able to obtain breakdowns of trading activity in credit default swaps, including the identity of the investors.

Telegraph:

• Deutsche Bank(DB) and Moore Capital Drawn into FSA Swoop on 'Insider Dealing'. Leading banks BNP Paribas, Deutsche Bank and top hedge fund Moore Capital are among those drawn into the investigation which reached its climax on Tuesday when 150 officers from The Financial Services Authority raided 16 addresses in and around London. Six men were arrested in the joint operation with officers from the Serious Organised Crime Agency.understands that Clive Roberts, head of European sales trading at Exane, in which BNP Paribas owns a 50pc stake, has been implicated in the investigation, along with a junior employee in Deutsche Bank's London office. In addition reports claimed that Julian Rifat, an execution trader at Moore Capital, has also been arrested after the officers raided the fund's London office. Moore Capital said that Mr Rifat is now on administrative leave.

The Guardian:

• Google(GOOG) Co-Founder Sergey Brin Urges US to Act Over China Web Censorship. Google co-founder Sergey Brin has called on Washington to take a stand against China's censorship of the internet, urging the US to make the issue a "high priority". Brin, talking to the Guardian about Google's decision yesterday to lift censorship from its Chinese internet search engine, called on government and businesses to act in order to put pressure on Beijing.

China Daily:

• US Likely to Label China 'Currency Manipulator'. The US Treasury Department is highly likely to label China a currency manipulator in a report due out in mid-April, but the move will be "more symbolic than substantive" to win mid-term Congressional elections in the fall, former US trade representative Susan Schwab told China Daily on Tuesday. If that were the case, it will be the first time in 16 years. By declaring China a currency manipulator, the US could slap additional tariffs on imports from the country. Some Chinese experts strongly doubt the US will do so as it will provoke Beijing and jeopardize its most important trade relationship, while others believe that even if China were declared a currency manipulator, Washington will not follow up with punitive measures. "There is a high possibility, definitely (that China will be labeled as a manipulator), but it is very important to remember the decision is largely symbolic and does not force any actions, other than consultations," she said. Schwab said "a significant growing number" of Democrats are increasingly pushing protectionist solutions, which she said was unfortunate."This is a very difficult decision (for the US government) to make. It is under a lot of pressure on the high unemployment rate and the coming election this fall." As the mid-term election campaign looms, the Obama administration could "easily make China a scapegoat by blaming the country for their own problems," Huo said.

China Securities:

• The yuan may strengthen by between 3% and 5% this year against the U.S. dollar, starting in April, citing a forecast by China International Capital Corp. The Chinese currency may strengthen "gradually," instead of through a one-step revaluation, citing the forecast by the Beijing-based investment bank.

Evening Recommendations
Citigroup:

• Reiterated Buy on (ADBE), target $42.
  
• Reiterated Buy on (PLCE), target $50.
• Reiterated Buy on (URBN), target $42.
• Reiterated Buy on (CCL), raised estimates, boosted target to $47.
  

Night Trading

• Asian indices are unch. to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 98.0 - 5.0 basis points.
• S&P 500 futures -.12%
• NASDAQ 100 futures -.10%

Morning Preview Links

Earnings of Note
Company/Estimate

• (LEN)/-.34
• (GIS)/.93
• (PAYX)/.33
• (CMC)/.91
• (RHT)/.16

Economic Releases
8:30 AM EST

• Durable Goods Orders for February are estimated to rise +.6% versus a +3.0% gain in January.
• Durables Ex Transports for February are estimated to rise +.6% versus a -.6% decline in January.

10:00 AM EST

• New Home Sales for February are estimated to rise to 315K versus 309K in January.

10:30 AM EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,650,000 barrels versus a +1,012,000 barrel gain the prior week. Gasoline inventories are expected to fall by -1,500,000 barrels versus a -1,710,000 barrel decline the prior week. Distillate supplies are estimated to fall by -985,000 barrels versus a -1,491,000 barrel decline the prior week. Finally, Refinery Utilization is expected unch. versus an -.18% decline the prior week.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Treasury's $42B 5-Year Note Auction, Treasury's Wolin speaking, Fed's Hoenig speaking, Fed's Kohn speaking, weekly MBA mortgage applications report, BB&T Commercial & Industrial Conference, Barclays Healthcare Conference, (COP) analyst meeting and the (SBUX) shareholder meeting could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial shares 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.

Stocks Surging into Final Hour on Short-Covering, Technical Buying, Declining Sovereign Debt Angst

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 16.51 -2.25%
  
• ISE Sentiment Index 154.0 +22.22%
  
• Total Put/Call .73 -19.78%
  
• NYSE Arms .82 +14.11%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 87.80 bps -4.01%
  
• European Financial Sector CDS Index 77.33 bps -1.05%
  
• Western Europe Sovereign Debt CDS Index 74.82 bps -1.88%
  
• Emerging Market CDS Index 218.44 bps -1.44%
  
• 2-Year Swap Spread 17.0 bps -2.0 bps
  
• TED Spread 16.0 +1.0 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .12% -2 bps
  
• Yield Curve 270.0 bps +1 bp
  
• Copper Days Demand 15.26 days unch.
  
• Citi US Economic Surprise Index +41.50 +.3 point
  
• 10-Year TIPS Spread 2.21% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +25 open in Japan
• DAX Futures: Indicating +21 open in Germany

Portfolio:

• Higher: On strength in my Financial, Biotech and Tech long positions
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the major averages break to session highs out of their recent range, despite China bubble/trade concerns, healthcare reform fears, tax hike worries and disappointing economic data. On the positive side, Semi, Computer, Steel and Coal shares are especially strong, rising 2.0%+. Small-cap and cyclical stocks are outperforming. Despite an equity rally, poor US housing data and news that Eurozone countries are close to a Greek aid deal, the euro is trading near session lows, falling .35% against the dollar. Considering these developments, huge speculative shorts in the currency and its oversold state, it trades very poorly. Weekly retail sales rose +3.4% this week, which is the highest since the week of April 10th, 2007. On the negative side, Oil Service, Gold, Internet, Medical, Hospital, HMO, REIT and Education stocks are all down on the day. The market's performance today is very impressive again, considering the news. I suspect some large shorts are capitulating today, which is adding to broad market gains. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, declining sovereign debt angst and technical buying.