Stocks Lower into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Profit-Taking, More Shorting

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 15.38 +2.26%
  
• ISE Sentiment Index 87.0 -15.53%
  
• Total Put/Call .88 +3.53%
  
• NYSE Arms .80 -41.84%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.40 +4.34%
  
• European Financial Sector CDS Index 138.99 +.82%
  
• Western Europe Sovereign Debt CDS Index 223.41 +1.68%
  
• Emerging Market CDS Index 227.13 +5.10%
  
• 2-Year Swap Spread 26.75 +1.5 basis points
  
• TED Spread 37.75 -1.5 basis points
  
• 3-Month EUR/USD Cross-Currency Basis Swap -54.75 +5.0 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .10% +2 bps
  
• Yield Curve 197.0 -2 bps
  
• China Import Iron Ore Spot $144.80/Metric Tonne +.07%
  
• Citi US Economic Surprise Index 30.80 -2.3 points
  
• 10-Year TIPS Spread 2.44 +1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating a -76 open in Japan
• DAX Futures: Indicating a +39 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech, Retail and Medical sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 trades slightly lower, but near session highs despite recent gains, rising Eurozone debt angst and rising global growth fears. On the positive side, Internet, Bank, I-Banking, Retail and Airline shares are especially strong, rising more than +.5%. Financial shares are trading very well again today. The UBS-Bloomberg Ag Spot Index is falling -1.1%, Gold is down -.9% and Oil is down -2.1%. The Portugal sovereign cds is down -4.2% to 1,224.92 bps. Moreover, the European Investment Grade CDS Index is down -3.8% to 94.67 bps. Weekly retail sales rose +3.3% this week versus a +3.1% gain the prior week. Retail sales are improving, but are at still sluggish rates for a recovery. On the negative side, Coal, Oil Tanker, Energy, Oil Service, Steel, Hospital, HMO, Construction and Road & Rail shares are under meaningful pressure, falling more than -1.50%. The Transports and Small-caps are underperforming. Lumber is down -3.6% and Copper is down -1.8%. Major Asian Indices were mostly lower overnight, led down by a -1.4% decline in China. China's ChiNext Index is down -4.6% in 5 days. Major European indices fell around -1.25% today, led lower by a -1.4% decline in Germany. The Bloomberg European Financial Services/Bank Index fell -1.6%. The Germany sovereign cds is rising +4.65% to 70.0 bps, the France sovereign cds is up +5.55% to 164.12 bps, the UK sovereign cds is rising +5.3% to 61.58 bps, the Italy sovereign cds is gaining +2.5% to 357.83 bps, the Japan sovereign cds is gaining +4.4% to 107.25 bps and the Spain sovereign cds is rising +2.9% to 409.67 bps. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its mid-December peak despite investor perceptions that the US economy is accelerating. Lumber is -8.3% since its Dec. 29th high despite the better US economic data, dovish Fed commentary, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the weekly MBA Purchase Applications Index has been around the same level since May 2010. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -20.5% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +754.0% ytd. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. US stocks continue to trade very well as they consolidate recent gains in a healthy fashion and ignore almost all negatives. The most cyclical shares underperformed significantly today. This trend will likely intensify as the year progresses. For the recent equity advance to maintain traction, I would still expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-higher into the close from current levels on a bounce in the euro off the lows, falling energy prices, short-covering, more financial sector optimism and investor performance angst.

Today's Headlines

Bloomberg:

• Spain's Castilla Said to Sell Debt as Rajoy Backs Regions. Spain’s region of Castilla y Leon is selling bonds in the third public transaction by a regional administration in the past week after Prime Minister Mariano Rajoy offered the states loans to help them meet liabilities. The 2014 bonds issued in euros by Junta de Castilla y Leon will be priced to yield 210 basis points more than Spanish government bonds, according to a banker involved in the transaction, who declined to be identified before the transaction was completed. Aragon and the Madrid region issued debt last week, according to Bloomberg data. Spain’s regions, which control more than a third of public spending, have been locked out of capital markets, forcing them to sell debt to their citizens and leave bills to suppliers unpaid. The central government is offering regions credit lines to help them meet bond redemptions and pay suppliers, a move Moody’s Investors Service said yesterday was positive for the states. Rajoy’s government created a credit line of as much as 15 billion euros ($19.8 billion) via the Official Credit Institute on Feb. 3, part of which was aimed at helping regions meet bond redemptions. It approved on March 2 another 35 billion euros of loans, mostly through the country’s banks, to enable regions and town halls to pay suppliers.
  
• Pimco's Kashkari Says Greece, Portugal to Need More Bailouts. Pacific Investment Management Co.’s Neel Kashkari, who heads global equities at the Newport Beach, California-based investment firm, said Greece and Portugal will need additional bailouts. “We don’t think that Greece will actually be able to deliver on the austerity measures they’re promising,” Kashkari said today in an interview on Bloomberg Television’s “InBusiness with Margaret Brennan.” “Risks in Europe remain, so we’re being very selective.” Europe’s approval of a 130 billion-euro ($172 billion) rescue package for Greece, the second such bailout since 2010, doesn’t solve the region’s sovereign-debt crisis, Kashkari said. While U.S. economic indicators have been improving, risks of further “shocks” coming out of Europe and slowing growth in the emerging markets are leading Pimco to buy stocks only selectively, he said.
• Greece's Third Bailout Seen in Debt With Junk Grade: Euro Credit. Greece’s bonds and credit ratings are factoring in a third bailout for the nation that analysts and investors say will require greater concessions from its international creditors. Within a week of euro-area member states giving their formal approval to a second bailout package for Greece, the International Monetary Fund said the country may require additional funding or a further debt restructuring. Pacific Investment Management Co., which runs the world’s biggest bond fund, said it remains “cautious” on euro-area government debt even after the largest-ever sovereign refinancing because the risk remains that Greece will leave the single-currency area. It’s still a very steep mountain to climb,” said Harvinder Sian, a senior fixed-income strategist at Royal Bank of Scotland Group Plc in London. The restructuring deal “doesn’t do anything to put Greece on a sustainable path,” he said. “A third bailout will become necessary.” The price of Greek government bonds maturing in February 2042 that were provided as part of its debt exchange was at 21.48 cents on the euro at 8:04 a.m. London time, with yields at 15.02 percent. Standard & Poor’s said on March 15 it rated the securities CCC, its fourth rank above default, citing questionable growth prospects, a weakening political consensus to implement budget cuts, and a “still large” debt burden.
• Oil Drops From Three-Week High on Speculation of Supply, China Demand Worries. Oil dropped on forecasts that U.S. crude stockpiles increased to a six-month high and on signals that economic growth and fuel demand will slow in China. Oil for April delivery fell $1.91, or 1.8 percent, to $106.18 a barrel at 11:47 a.m. on the New York Mercantile Exchange. The contract gained 1 percent to $108.09 a barrel yesterday, the highest settlement since March 1. Futures are up 7.4 percent this year. The April contract expires today. More actively traded May futures declined $1.99, or 1.8 percent, to $106.57 a barrel. Brent oil for May settlement decreased $1.63, or 1.3 percent, to $124.08 a barrel on the London-based ICE Futures Europe exchange.
• Goldman's(GS) Russia Exodus Grows as Workman Quits for Otkritie. Michael Workman, Goldman Sachs Group Inc. (GS)’s executive director in fixed income in Moscow, quit to join Otkritie Financial Corp., a month after the U.S. bank’s co-heads and chief trader in the Russian capital left.
• IRS Flags Almost 2 Million Tax Returns in Anti-Fraud Efforts. The Internal Revenue Service has identified and started reviewing almost 2 million tax returns for possible fraud, Deputy Commissioner Steven Miller told a U.S. Senate subcommittee.
• U.S. Housing Heals as Starts Near Three-Year High: Economy. Builders broke ground on 698,000 homes at an annual rate, in line with the median forecast of economists surveyed by Bloomberg News and down 1.1 percent from a January pace that was stronger than previously reported, Commerce Department figures showed today in Washington. Building permits, a proxy for future construction, climbed to the highest level since October 2008.
• China's Stocks Fall Most in Almost a Week on Profit Concerns. “Higher energy costs and falling profits may worry investors that the economy is slowing even further,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. The Shanghai Composite Index lost 33.35 points, or 1.4 percent, to 2,376.84 at the close. The CSI 300 Index declined 1.7 percent to 2,584.45.
• China Auto Sales May Miss Growth Goal on Economy, Fuel Costs. China's vehicle sales this year will probably miss their 8 percent growth forecast as the slowing economy and rising fuel costs curb buying, said an official at the state-backed auto association. Bayerische Motoren Werke AG, Daimler AG and Volkswagen AG shares dropped. Total vehicle deliveries may fail to increase by even 5 percent because of the "difficult" economic backdrop, Gu Xianghua, deputy secretary general of the China Association of Automobile Manufacturers, said today, citing his personal opinion. Demand for commercial automobiles may be affected the most, falling as much as 8 percent, Gu said. "The slowing macro-economy will make it difficult to secure loans for commercial vehicles, restrictions on car ownership such as in Beijing, and car ownership costs such as fuel and parking fees are increasing," said Gu, who was speaking at a conference in the eastern Chinese port city of Qingdao. "All these factors will have an impact on car buying in China." Chinese auto sales, which jumped more than fivefold in the last decade, may increase at a slower pace than the economy if Gu's projection is realized. Passenger-car sales had their worst two-month start in seven years in January and February, declining 4.4 percent to 2.37 million units, according to the association's data.
• Afghan Night Raids May Need Warrants Under U.S. Offer to Karzai. Night raids involving U.S.-led forces in Afghanistan might require court warrants under a compromise being considered to remove a hurdle to partnership with the Afghan government after most American troops withdraw, a U.S. defense official said.
• Free Lunches Pushing U.S. to Involvency, Columbia's Mundell Says. Political competition for votes and lack of fiscal discipline are pushing the world’s largest economy toward solvency issues, according to the Nobel Prize- winning economist Robert Mundell. “The public is looking for free lunches, and the political competition for votes makes the politicians offer them free lunches,” Mundell, a professor of economics at Columbia University, said on Bloomberg Radio interview with Tom Keene and Ken Prewitt. “That’s what gets us in to the difficulties of insolvency.” The U.S. plans to finance a budget deficit forecast to exceed $1 trillion for a fourth year and outstanding U.S. marketable debt expanded to $10 trillion in February. “You could have fiscal stimulus back in the day of Keynes, when the government was a small proportion of gross domestic product and there was no insolvency problem,” he said, referring to British economist John Maynard Keynes. “You can’t just issue more bonds to pay for deficits and expect it to solve the employment problem.”

Wall Street Journal:

• Copper Another Victim of China Worries. Copper futures sank amid worries that higher energy prices could sap global economic growth and on renewed concerns about China's economic slowdown. The most actively traded contract, for May delivery, was down 8.40 cents, or 2.2%, at $3.8240 a pound in Tuesday morning trade on the Comex division of the New York Mercantile Exchange. Copper futures were roiled amid comments from two of the world's largest mining companies that growth in China, the world's second-largest economy, is slowing. The president of BHP Billiton's BHP -3.75% iron-ore division, Ian Ashby, cautioned that China's demand for iron ore will drop "to single digits, if it is not already there."
• The GOP Budget and America's Future by Paul Ryan. The president's budget gives more power to bureaucrats, takes more from taxpayers to fuel the expansion of government, and commits our nation to a future of debt and decline.
  

MarketWatch:

• S&P Indices, ISDA Launch 2 New Credit Default Swap Indices Measuring the Credit Quality of US and European Finance Sectors.

CNBC.com:

• Economy 'Very Challenging' as Interest Rates Rise: Bernanke. A recent rise in interest rates has caught the attention of the Federal Reserve, whose chief sees an economy that is showing gradual improvement.
• Strong Recovery May Speed 2014 Rate Hike: Fed Nominee. One of President Barack Obama's nominees to the Federal Reserve Board said on Tuesday it would be appropriate for the central bank to start raising interest rates before 2014 if the recovery accelerates.

Business Insider:

• A Black Militia Group Says It Plans To Arrest The Neighborhood Watchman Who Shot A Black Teenager.
• You're Nuts If You Think There's A Better Tablet Than The iPad. (review)
• Cheap Natural Gas is Having a Big Effect on American Industry.
  
• YARDENI: The NY Fed President Is Suffering From The Same Behavioral Disorder As UFO Cult Followers From The 1950s.
  

Zero Hedge:

• US Taxpayers Commence Bailing Out ECB, With Greece As Intermediary.
• Will China's 'Soft' Landing Be 'Hard' on Global Exporters?
• $4 Gas Average Is Here. (graph)
• Obama Adviser, And Goldman(GS) Client, Gene Sperling Filibusters CNBC With "Shared Sacrifice" Speech In Response To Ryan Budget.

New York Times:

• U.S. to Place Tariffs on Solar Panels From China. The tariffs were smaller than many industry executives had expected — 2.9 to 4.73 percent — which could blunt their effect on sales. But the decision was nonetheless likely to be seen as a milestone because of its implications for international trade, renewable energy and American manufacturing.
  

US News:

• Why War With Iran Is Likely by James Rickards. Uncertainty reigns because of doubts about the sustainability of the recovery without continual doses of more zero-cost money from the Federal Reserve. The last thing capital markets need is an exogenous shock in the form of war in a critical part of the world, but that is exactly what is coming.

NY Post:

• Obama's Angry Adviser. Back when he agreed to advise the Obama administration on economics, General Electric CEO Jeff Immelt told friends that he thought it would be good for GE and good for the country. A life-long Republican, Immelt said he believed he could at the very least moderate the president’s distinctly anti-business instincts. That was three years ago; these days Immelt is telling friends something quite different. Sure, GE has managed to feast on federal subsidies, particularly the “green-energy” giveaways that are Obamanomics’ hallmark. But Immelt doesn’t think he’s had anywhere near as much luck moderating the president’s fat-cat-bashing, left-leaning economic agenda of taxing businesses and entrepreneurs to pay for government bloat. Friends describe Immelt as privately dismayed that, even after three years on the job, President Obama hasn’t moved to the center, but instead further left. The GE CEO, I’m told, is appalled by everything from the president’s class-warfare rhetoric to his continued belief that big government is the key to economic salvation. Or, as one friend recently put it to me, “Jeff thought he could make a difference, and now realizes he couldn’t.” Immelt’s conversion from public Obama supporter to a private detractor is important: It shows how even businessmen who feast off his subsidies worry about his overall economic agenda and its long-term impact on the economy.

Reuters:

• Angry Birds Partners With Major U.S. Retail Chain. Angry Birds maker Rovio is teaming up with a major U.S. retail chain to put its branded toys, books and T-shirts in dedicated areas of thousands of stores nationwide, the Finnish company's marketing chief told Reuters on Tuesday.

Financial Times:

• Slower China: End of the Commodity Super-Cycle? (graphs)
  

Der Spiegel:

• Poor Western German Cities Fed Up With Funding East. Closed swimming pools, potholed streets, run-down buildings. Many western German cities, especially in the industrial Ruhr rust belt, are looking worse for wear after years of neglect in which they've had to transfer billions funds to help rebuild the former communist east. Now their mayors want to stop paying.

FT Deutschland:

• German cities and towns are finding it increasingly difficult to obtain loans as banks begin to doubt the creditworthiness of municipalities previously deemed to offer riskless returns, citing banking executives. Several banks are analyzing the possibility of municipal defaults as the Greek sovereign debt crisis alters their risk perceptions.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.20%

Sector Underperformers:

• 1) Coal -3.30% 2) Oil Service -2.30% 3) Alt Energy -2.30%

Stocks Falling on Unusual Volume:

• SNP, ADBE, RIO, PTR, BMA, DLLR, MYGN, XXIA, ANGI, HMIN, JOBS, PANL, ZEUS, ITMN, SCHN, PKT, BMRN, ECHO, HEES, ZION, DNP, WF, JOY, HTS, RGP, CMI, DOLE and OSG
  

Stocks With Unusual Put Option Activity:

• 1) ADBE 2) JEF 3) XLI 4) FMCN 5) TIF
  

Stocks With Most Negative News Mentions:

• 1) CA 2) VECO 3) FFIV 4) ABVT 5) NBL
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Large-Cap Value -.30%

Sector Outperformers:

• 1) I-Banks +.59% 2) Retail +.29% 3) Utilities +.09%

Stocks Rising on Unusual Volume:

• FXCM, AMRN, NTAP, TIF, WMB and POT
  

Stocks With Unusual Call Option Activity:

• 1) BKS 2) TEF 3) ADBE 4) PXP 5) ARUN
  

Stocks With Most Positive News Mentions:

• 1) LMT 2) CAT 3) ADBE 4) BA 5) DO
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Tuesday Watch

Evening Headlines
Bloomberg:

• Greece's Third Bailout Seen in Debt With Junk Grade: Euro Credit. Greece's bonds and credit ratings are factoring in a third bailout for the nation that analysts and investors say will require greater concessions from its international creditors.
  
• S&P May Downgrade Almost All U.S. CDOs Backed by Structured Debt. Standard & Poor’s said it may lower almost all of the ratings it has assigned to U.S. collateralized debt obligations backed by structured-finance securities after a change in its methodology for grading the debt. The bonds under review had $63 billion of balances at issuance, New York-based S&P said today in a statement. These types of CDOs, which package assets such as mortgage bonds into securities with varying risks, helped spark the worst financial crisis since the Great Depression as some slices with AAA grades lost all of their value within a year.
• Buffett Message Is 'Do as I Say, Not as I Do': Alice Schroeder. The last few years have been a struggle for investors in Berkshire Hathaway Inc. (BRK/B) Since the March 2009 market low, the Standard & Poor’s 500 Index has risen 80 percent compared with 44 percent for Berkshire, even though crashing stock prices and unprecedented volatility perfectly suited Warren Buffett’s investing style.
• Australia Passes 30% Tax on Iron-Ore, Coal Mining Profits. Australia passed legislation that will reap about $11 billion in taxes within three years from BHP Billiton Ltd. (BHP), Rio Tinto Group and other iron-ore and coal miners as the government seeks to turn its budget to surplus. Prime Minister Julia Gillard’s Minerals Resource Rent Tax was passed in the upper house yesterday and will become law on July 1 after receiving backing from the ruling Labor party and the Greens, who hold the balance of power in the Senate.
• Banks May Be Skirting Oversight in Muni Bond Sales, SEC Says. Wall Street banks may not be exercising adequate oversight of state and local government bond sales, the Securities and Exchange Commission said, warning investors about risks in the $3.7 trillion municipal market. Reviews of underwriters showed that some may not be sufficiently examining bond documents for evidence of fraud, the agency’s Office of Compliance Inspections and Examinations said today. Banks are required to review bond documents to guard against false statements and can face sanctions if they don’t. “To protect investors, it is important that broker-dealers perform adequate due diligence to assess the financial and operational condition of states and municipalities before selling their securities,” Carlo di Florio, the director of the compliance office, said in a statement.
• Disney(DIS) Sees $200 Million Loss From 'John Carter' Picture. Walt Disney Co. (DIS), the world’s largest entertainment company, said the box-office flop “John Carter” will post a loss of about $200 million, one of the biggest ever for a single film. The film division will report a fiscal second-quarter operating loss of $80 million to $120 million as result of the picture, Burbank, California-based Disney said today in an e- mailed statement.
• GE Capital Rating May Be Cut Below Parent as Moody's Sees Risk. General Electric Co.’s (GE) financial unit may be given a lower debt rating than the parent company because of higher risk, Moody’s Investor Services said. The Aa2 ratings of both Fairfield, Connecticut-based GE and General Electric Capital Corp. (GELK) are both on review for possible downgrade and may “no longer be equalized,” Moody’s said today in a statement. “The review is based on Moody’s view that finance companies have higher risks than previously considered, implying a wider gap between the risk profiles of GECC and GE’s industrial businesses,” according to the statement.
• Facebook(FB) Said to Plan Paying 1.1% Feed to Banks. Facebook Inc. (FB), the social- networking website seeking to raise $5 billion in an initial public offering, will pay underwriters a 1.1 percent fee, two people with knowledge of the company’s plans said. The fee will be shared among Facebook’s underwriters, said the people, who asked not to be named because the details are private. Facebook has hired 31 banks to manage the IPO, including Morgan Stanley (MS) as lead underwriter. The lead bank typically earns a bigger cut of the total. At 1.1 percent, the company will be paying its banks one- fifth the typical rate for IPOs. Underwriters were paid an average of 5.48 percent in 127 offerings last year, Bloomberg data show.
• Shanghai Bonded Copper Stocks Gain to 530,000 Tons, Survey Shows. Copper inventories at bonded warehouses in Shanghai climbed to 530,000 metric tons last week, according to the median estimate in a Bloomberg News survey of seven traders and analysts. This companies with about 200,000 tons in the fourth quarter, according to Qu Yi, an analyst at CRU International Ltd. "Tepid demand at the world's largest user failed to absorb the imports," said Fang Junfeng, an analyst at Shanghai CIFCO Futures Co. "If you look at the sustained cash discount, you'd know how bad the consumption is at a time when we're supposed to see a seasonal pickup." The metal for immediate delivery on Shanghai's Changjiang Nonferrous Metals Market was quoted at a discount of about 250 yuan($40) to the front-month futures contract on the Shanghai Futures Exchanged yesterday. SHFE inventories were at 227,276 tons last week, almost four times as many as the beginning of December. Unwrought copper imports by China were the second-highest level ever in February, as arrivals of the refined metal, copper alloy and products totaled 484,569 tons, data from the General Administration of Customs showed.
• Mercedes Record 25% Discount Tops Shrinking China Margins. There has never been a better time to buy a Mercedes-Benz in China (CNVSTTL). The problem for luxury carmakers such as Daimler AG (DAI) is that the incentives are likely to get even bigger. Mercedes dealers are offering record markdowns of 25 percent on high-end models such as the S300 sedan, according to data stretching back to 2009 at cheshi.com, which tracks prices at more than 3,000 Chinese dealerships. BMW AG (BMW)’s 7-series and Audi AG (NSU)’s A8Ls sell for 20 percent below sticker prices, waiting lists have vanished and salesmen are dangling perks ranging from free iPhones to Hermes-bag coupons. The escalating price competition shows that the case is weakening for luxury cars to fetch higher prices and profit margins in Beijing than in New York and Berlin as supply catches up to demand. The discounts, which began late last year with entry-level models, are spreading to the priciest high-end sedans as the world’s second-largest economy slows and China’s rich find an increasing abundance of vehicles to choose from. “This year’s luxury-car discounting is the most I’ve ever seen,” said Scott Laprise, automotive analyst at CLSA Asia Pacific, who has been based in Beijing for more than five years. “China’s luxury car price premium is eroding.”
• Ship Owners Losing After $11.4 Billion Battle for Boxes: Freight. After a quarter in which companies selling space on container lines doubled rates, the amount the owners of the ships are being paid is the least in two years. Operators, who charter vessels and then charge shippers per container, are demanding $1,379 for a 20-foot box on the China- to-Europe trade route, up 97 percent this year, according to Clarkson Plc (CKN), the largest shipbroker. A measure of how much they’re paying ship owners fell 4.2 percent since the start of January, data from the Hamburg Shipbrokers’ Association show. The gap is growing because operators are leaving vessels idle or hiring fewer ships, driving down how much they pay owners, while restricting supply and boosting box rates.

Wall Street Journal:

• House GOP Budget to Target Tax Rates. House Republicans, seizing on what they hope is a potent campaign issue in the midst of a muddled political and economic landscape, will introduce a 2013 budget Tuesday that cuts tax rates and provides for two individual brackets of 10% and 25%. The budget would end the Alternative Minimum Tax, which was originally aimed at the wealthy but which ensnares a growing number of middle-class taxpayers each year. The plan would nearly eliminate U.S. taxes on American corporations' earnings from overseas operations.
• MBIA(MBI) Abandons Bonus Plan. MBIA Inc. abandoned plans to pay bonuses to top executives for 2011 after objections from New York's top financial regulator, who argued that the bond insurer would not survive without his help, according to people familiar with the situation.
• U.S. Offers Afghan Review of Night Raids on Homes. The Obama administration is offering to cede some control over nighttime missions into Afghan village homes, U.S. officials say, in a bid to ease tensions with Afghan President Hamid Karzai that took on new urgency with the deadly rampage in a Kandahar village last week. The administration's most significant concession on night raids would subject the operations to advance review by Afghan judges, U.S. military officials said. One option under discussion in the U.S.-Afghan talks would require warrants to be issued before operations get the green light.
• Chevron's(CVX) Troubled Waters. Brazilian prosecutors' planned criminal charges against Chevron Corp. executives for an offshore oil leak threatens to stifle foreign companies' drilling plans in this petroleum-rich nation. Brazil will file criminal charges Wednesday against executives from Chevron and drilling-rig operator Transocean Ltd., accusing them of environmental crimes related to an offshore oil spill in November, prosecutor Eduardo Santos de Oliveira said in an interview Monday.
• French School Killings Spark Horror. A manhunt was under way in this southern French city for a lone gunman who opened fire on a Jewish school Monday, killing four people including a father and his two sons, with a weapon used in two similar attacks in recent days.
• Solar-Panel Users Prepare for Tariffs on Chinese Imports. As U.S. trade officials prepare their preliminary decision on a dumping complaint against Chinese solar-panel makers, U.S. panel users are preparing for new tariffs on Chinese imports by lining up new sources of the panels, sometimes at a significant cost.
• ObamaCare's Flawed Economic Foundations. The insurance mandate has almost nothing to remedying costs imposed on the system by those without coverage.

MarketWatch:

• China's Stock-Market Supervision Suffering. Understaffed securities regulator, weak legal system cited.
• $5 Gas Prices Would Tank Consumer: Wilbur Ross. Wilbur Ross, the billionaire private-equity investor known for turning around struggling companies, said Monday he is concerned about the impact of rising gasoline prices on the U.S. economy. “What I am worried about is the following: gas prices have been high and the effect on the consumer has been hidden,” due to the mild winter, Ross told MarketWatch in an interview Monday at the New York Stock Exchange, on the sidelines of an event promoting investment in Ireland. “If we hit $5 at the gas pump over the summer, that would have a profound effect on the consumer,” he said.

Business Insider:

• JEFFERIES: The Collapse Of India's Investment Cycle Is Far From Being Played Out.
• Oprah Winfrey Network Lays Off One-Fifth of Staff.
• One Man's 'Astonishing' Escape From A North Korean Death Camp.

Zero Hedge:

• ABC Reports Russian Troops Have Arrived In Syria, Russia Denies.
• To Bail Or Not To Bail: A Simple Question Of Math; And Why Taxpayers Will Be On The Hook Until The End.

CNBC:

• Small Car Prices Rising. You knew it was only a matter of time until we saw the rotation into small cars putting the squeeze on buyers. In fact, we are now seeing it with both new and used small cars. Across the board, prices for these cars are moving up along with gas prices.

NY Times:

• For LSAT, Sharp Drop in Popularity for Second Year.
  

Washington Post:

• Human Rights Watch Says Abuses Continue In Myanmar Conflict Zone Despite Reforms. It sounds a lot like the old, military-run Myanmar, and not much like the reform-minded new one: A feared army attacking civilians indiscriminately, razing homes and raping women while the government prevents international aid from reaching tens of thousands of displaced survivors.

Forbes:

• The Expanding Wealth of Washington. Throughout the brutal and agonizingly long recession, only one large metropolitan area escaped largely unscathed: Washington, D.C. The city that wreaked economic disasters under two administrations last year grew faster in population than any major region in the country, up a remarkable 2.7 percent. Boom times in the capital — particularly amid a weak recovery elsewhere — are driving this growth. Since 2007, notes Stephen Fuller at George Mason University, the D.C. region’s economy has expanded 14 percent compared with a mere 3 percent for the rest of the country. Washington’s unemployment never scaled over 7 percent, well below the national average, and is now down to around 5.5 percent, about the lowest of any major metropolitan area. Unemployment of course is much higher, reaching 25 percent, in some of the district’s poorer neighborhoods. This prosperity is rooted largely in the steady growth of the federal workforce, as federal spending accounts for one-third of the region’s economy. Over the past decade 50,000 bureaucratic jobs have been added in the area while local federal spending grew 166 percent. The D.C. region, with 5 percent of the nation’s population, garners more than three times that percentage in payroll and more than four times that percentage in procurement dollars.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).
• 56% Favor Repeal of Health Care Law, 39% Oppose Repeal. The latest Rasmussen Reports national telephone survey of Likely U.S. Voters shows that 56% at least somewhat favor repeal of the health care law, including 46% who Strongly Favor it. Thirty-nine percent (39%) oppose repeal, with 29% who are Strongly Opposed.

USA Today:

• Apple(AAPL) Sells 3 Million New iPads in 3 Days. Apple said it sold 3 million of the new iPad tablet computers over the weekend, setting a company record.

Reuters:

• Vatican Bank Image Hurt as JPMorgan(JPM) Closes Account. JP Morgan Chase is closing the Vatican bank's account with an Italian branch of the U.S. banking giant because of concerns about a lack of transparency at the Holy See's financial institution, Italian newspapers reported.
• Hedge Funds Key Sellers of Treasuries, Report Says. Hedge funds, other large investors sold 78% of their holdings of 2Y Treasuries in the week ended March 13, according to a report by BofA Merrill analyst Mary Ann Bartels.
• Amazon.com(AMZN) to Buy Kiva Systems for $775 Million. Amazon.com Inc said on Monday it agreed to buy Kiva Systems Inc for $775 million in cash, a deal that will bring more robotic technology to the e-commerce company's giant network of warehouses. The acquisition, which has been approved by Kiva's stockholders, is expected to close in the second quarter of 2012, Amazon added in a statement.
• Adobe Revenue Slows Ahead of Upgrades, Shares Fall. Adobe said it expects to post second-quarter revenue of $1.090 billion to $1.140 billion, compared with the average analyst forecast of $1.1 billion. It forecast second-quarter profit, excluding items, of 57 to 61 cents per share, compared to the Street view of 60 cents. Shares of Adobe closed at $34.51 on Nasdaq and fell 4.4 percent to $33.00 in extended trading.
• BHP Billiton(BHP) Sees China Iron Ore Demand Flattening. BHP Billiton, the world's biggest miner, is seeing signs that iron ore demand from top consumer China is flattening but is pushing ahead with its ambitious plans to expand production. "Growth is going to flatten off," BHP's iron ore division president, Ian Ashby said ahead of the Global Iron Ore & Steel Forecast Conference in Perth on Tuesday. Chinese demand for iron ore has been the driving force behind years of expansion work by the world's biggest mining companies. BHP has being pursuing a strategy of running at full production and expanding capacity in long-life, low-cost commodity assets. Ashby said BHP was sticking with its $10 billion iron ore expansion plan and was mining ore at a rate of 165-170 million tonnes per year. That is above its production guidance of 159 million tonnes in fiscal 2012 ending June 30, maintaining the company's No.3 global ranking in iron ore behind Vale and Rio Tinto .
• Monti's Moment of Truth, Facing Trade Unions. Mario Monti will walk into a meeting with Italy's trade union bosses on Tuesday, knowing it can help make, or break, his brief tenure as prime minister - and hopes of dragging the economy out of the mire.
• Michael Kors(KORS) Raises Forecast. Michael Kors Holdings Ltd reported strong retail sales and raised its earnings outlook on Monday, sending the fashion company's shares up 3 percent in after-hours trading.
• Williams(WMB) Buying Infrastructure in Marcellus Shale. Williams Cos Inc struck a $2.5 billion deal to buy a natural gas gathering and processing business in the Marcellus shale, increasing its exposure to the boom in liquids-rich natural gas. Soaring supplies of natural gas in the United States have pushed prices for the fuel to their lowest in a decade. In response, exploration and production companies have increased output of crude oil and natural gas that can be stripped of fuels like propane that fetch higher prices. Williams is buying the Caiman Eastern Midstream business, a unit of privately held Caiman Energy, through its master limited partnership, Williams Partners LP. Williams owns 72 percent of Williams Partners, as well as the partnership's general partner. Williams Partners plans to fund the purchase price of the acquisition with a $1.78 billion in cash and the issuance to Caiman of about 11.8 million Williams Partners common units valued at about $720 million.

Globe and Mail:

• Canadian Bank Regulator Proposes Heightened Scrutiny of Mortgage Market. Canada’s financial regulator is proposing strict rules to tighten lending practices in the housing sector, a move that could cool the red-hot market after months of warnings about rising consumer debt. The new rules would require banks to take a closer look at how much a property is worth before issuing a mortgage – and to know more about the monthly finances of borrowers before the money is doled out.

China Daily:

• China Insurers Put Under Greater Supervision. The heads of China's four leading insurance companies have been brought under high-level supervision by promotion to vice-minister status, from bureau level previously. Personnel appointments at the companies will be supervised by the Organization Department of the Communist Party of China Central Committee instead of the China Insurance Regulatory Commission, the report said.

National Business Daily:

• China will "substantially" raise the threshold for entry into the drug sales business, citing Xie Wei, an official at the food and drug administration of the southwestern Chinese province of Sichuan.

Evening Recommendations
Piper Jaffray:

• Rated Rated (CF) Overweight, target $230.

Night Trading

• Asian equity indices are -.75% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 146.50 n/a.
  
• Asia Pacific Sovereign CDS Index 110.50 -3.0 basis points.
• FTSE-100 futures -.17%.
  
• S&P 500 futures -.09%.
  
• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TIF)/1.41
• (DSW)/.50
• (JEF)/.29
• (ORCL)/.56
• (JBL)/.58
• (CTAS)/.52

Economic Releases
8:30 am EST

• Housing Starts for February are estimated to rise to 700K versus 699K in January.
• Building Permits for February are estimated to rise to 686K versus 676K in January.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Kocherlakota speaking, Greek bond auction, weekly retail sales reports and the (GAS) analyst day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.