Thursday Watch

Late-Night Headlines
Bloomberg:

- U.S. stocks trading above their 200- day average price shrank to the fewest since at least 1994 this week as benchmarks dropped to the lowest level in 12 years, signaling that the market may rally because the decline was overdone. The percentage of common stocks listed on the New York Stock Exchange trading above their 200-day moving average fell to 1.2 percent on March 2, the smallest since Bloomberg data began in 1994.

- The euro fell, snapping two days of gains versus the yen, on speculation the European Central Bank will cut interest rates today and signal further reductions in borrowing costs to counter the region’s deepening recession. The euro also headed for a fourth weekly loss versus the dollar before a statistics office report that economists say will reiterate Europe’s economy shrank the most in at least 13 years last quarter. The yen traded near the weakest in four months against the greenback after government data showed Japanese companies slashed spending at the fastest pace in a decade.

- JPMorgan Chase & Co.(JPM), the second- largest U.S. bank, had its rating outlook cut to negative from stable by Moody’s Investors Service, reflecting expectations the lender will suffer from provisions for bad loans and credit costs for at least the next year.

- The cost of protecting against default by Warren Buffett’s Berkshire Hathaway Inc. soared to record levels more typical of junk-rated companies amid concern the firm faces losses on derivatives. Credit-default swaps used to guard against losses on Berkshire’s debt climbed 15 basis points to 515 basis points at 3:45 p.m. in New York, according to CMA DataVision, and earlier reached 535. The contracts yesterday traded as if the company, rated Aaa by Moody’s Investors Service, were 11 grades lower at Ba2, according to data from Moody’s capital markets research group. The price may be rising on concern the Omaha, Nebraska- based firm will lose bets on the direction of world equity markets, high-yield corporate bonds and municipal debt. That scenario assumes Berkshire would drain its $25.5 billion cash hoard and then find itself unable to raise more from stock or bond sales or the company’s historically profitable insurance and utility businesses.

- Chinese steelmakers, the largest buyer of iron ore, want Cia. Vale do Rio Doce, BHP Billiton Ltd. and Rio Tinto Group to cut prices of the material by between 40 percent and 50 percent this year, Anshan Iron & Steel Group said.

- Steel prices in China, the world’s largest maker of the metal, have dropped below output costs and a further decline may lead to production cuts, Shougang Corp. said. “A 20% cut may be suitable for the current demand situation,” Shougang’s Chairman Zhu Jimin said today on the sideline of the National People’s Congress. Shougang is China’s eighth-largest steelmaker. Benchmark steel prices in China have fallen 13% since Feb. 4 after mills increased output on expectation of demand coming from the government’s $585 billion stimulus package. More than 60% of Chinese mills are losing money, the China Iron and Steel Assoc. said. Feb. 23.

Wall Street Journal:

- The Obama administration announced details of a housing-rescue plan it said would help as many as one in nine homeowners, from low-income Americans struggling to avoid foreclosure to well-off borrowers who owe more than their homes are worth.

- After a slew of downgrades, weakened sales and capital woes at many life insurers, the battered industry appears headed for consolidation. Slammed with back-to-back credit downgrades and its stock in free fall, Hartford Financial Services Group Inc.(HIG), which has both property-casualty and life-insurance units, has entertained options from selling the company to breaking it up, according to people familiar with the situation.

- Google Inc.'s(GOOG) YouTube and Universal Music Group are discussing a partnership under which YouTube would build a new hub for music videos. YouTube would also provide technology and advertising-sales support to help distribute Universal's video content to other Web sites, people familiar with the matter say.

- At a time when the news is filled with large companies announcing major layoffs, some small businesses are determined to buck the trend. For some companies, it's a matter of pride: They've never had a layoff and they don't want to start now.

- Foreign lenders who rushed into China in recent years are watching nervously as a number of companies there teeter on the brink of insolvency. Their worry: The nation's bankruptcy laws may leave them with virtually nothing. Several big Western investors -- Citigroup Inc., hedge-fund manager Citadel Investment Group LLC, Credit Suisse Group and CLSA Capital Partners -- are seeking to get back between $100 million and $200 million in loans extended to a Chinese steelmaker, according to people familiar with the matter.

NY Times:

- The billionaire financier Carl C. Icahn put another $250 million into his hedge fund at the beginning of the year after suffering further losses in the fourth quarter on investments in Motorola and Yahoo, according to a letter he sent to investors. The Icahn Fund Ltd. was down about 33 percent through the end of January after plummeting 22 percent in the fourth quarter, according to the letter. After receiving more than $1 billion in redemption requests from investors, Mr. Icahn put $250 million of his own cash into the fund in November to avoid selling shares to meet the redemptions.

Politico:

- Sen. Mel Martinez (R-Fla.) said Wednesday Republican opponents of the $410 billion omnibus spending bill are within "striking distance" of bringing down the massive measure. Derailing the spending bill would be a huge victory for Republicans, and they might accomplish the goal with the help of a few reform-minded Democrats. Opposition to the sprawling measure has been growing for a variety of reasons, including a proposed change of Cuba policy, the inclusion of thousands of earmarks and the spending bill's overall price tag.

Lloyd’s List:

- The world’s bloated bulk carrier orderbook “spells disaster” for shipping markets and could produce “a wave of destruction for banks to rival the sub-prime crisis”, one of London’s most respected shipbrokers forecast on Wednesday. Shipping is in “the eye of the storm” as the global economy and world trade faces its most serious crisis in 60 years, Howe Robinson said. At the same time there are more than 3,000 bulk carriers on order at 155 different yards in 15 countries by 479 known owners. All are scheduled for delivery by 2011. “Even if you slash the orderbook it’s still too big and banks may not realize that with these defaults and moving into a recession they may become one of the biggest shipowners around,” a Howe Robinson spokesman said. Analysis reveals a staggering mismatch between supply and demand. “The supercycle era is bust,” the report bluntly concluded.

newsday.com:

- Over budget $1 Billion, NASA gets $1 Billion more from stimulus; more discipline needed, auditors say.

AP:

- Kansas Gov. Kathleen Sebelius, President Barack Obama's choice to head the Health and Human Services Department, is facing questions about increased state payments to a social services group whose board includes the chairman of the state Democratic Party.

Reuters:

- Google Inc(GOOG) CEO Eric Schmidt said the economic storm will affect all forms of advertising, including the online ads that Google depends on, but said that he doesn't expect Google to experience a decline in revenue.

- General Electric Co (GE) shares fell as much as 16 percent on Wednesday, touching their lowest point since 1991, as investors worried about a possible downgrade of GE's credit rating and how its finance arm would get through the recession.

TimesOnline:

- The European Commission has begun an inquiry into petrol pricing amid allegations that the full benefit of recent steep falls in the global price of oil are not being passed on to motorists. Details of the inquiry emerged in correspondence seen by The Times from Neelie Kroes, the EU’s Competition Commissioner.

Telegraph:
- European banks face a US dollar “funding gap” of almost $2 trillion as a result of aggressive expansion around the world and may have difficulties rolling over debts, according to a report by the Bank for International Settlements. The BIS said European and British banks have relied on an “unstable” source of funding, borrowing in their local currencies to finance “long positions in US dollars”. Much of this has to be rolled over in short-term debt markets. The currency mismatch has become a potential risk for banks as the dollar continues to climb against the euro and Swiss franc, and especially sterling and Sweden’s krona. “The build-up of large net US dollar positions exposed these banks to funding risk, or the risk that their funding positions could not be rolled over,” said the BIS. The report, entitled “US dollar shortage in global banking”, helps explain why there has been such a frantic scramble for dollars each time the credit crisis takes a turn for the worse. Many investors have been wrong-footed by the powerful rally in the dollar against almost all currencies, except the yen.

easyBourse:

- Hedge funds, once defined as investment pools for the rich, now get most of their assets from institutions such as pension funds, according to a report Wednesday.
High net worth individuals, who for a long time were the main investors in hedge funds, now account for slightly less than half of total assets, as they played the biggest role in a recent wave of hedge fund redemptions, the study said.

Straits Times:

- Minister Mentor Lee Kuan Yew yesterday raised the possibility of Singapore's economy shrinking by as much as 10 per cent this year. This would happen if the country's exports continue to drop at the same speed as they did earlier this year, he predicted. They fell 35 per cent in January. Said Mr Lee: 'If the second quarter shows a further drop of another 30, 40 per cent, it (economic growth) will go down to -10 (per cent).' If so, this would be a performance four times worse than 2001's record low when the economy shrank 2.4 per cent.

Business Standard:

- Global IT giant IBM(IBM) is understood to be the front-runner to acquire Satyam Computer Solutions, a company it named as one of its main competitors in a filing to the New York Stock Exchange in February.

Australian Financial Review:

- Australia’s securities regulator is expected to extend the ban on short-selling financial and property stocks.

South China Morning Post:

- Chinese Vice President Xi Jinping said unemployment in Hong Kong is likely to climb to 6.5% as exports decline, citing Xi. The worst of the financial crisis is yet to come, he said. Exports may drop by a double-digit percentage in the first half and the unemployment rate my increase to 6.5% or even higher, Xi said.

Late Buy/Sell Recommendations
Citigroup:

- Upgraded (LZ) to Buy, target $32..

- Reiterated Buy on (FL), target $10.

Night Trading
Asian Indices are -.25% to +1.75% on average.
S&P 500 futures -.64%.
NASDAQ 100 futures -.32%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/EPS Estimate
- (CIEN)/-.07

- (URBN)/.28

- (COO)/.39

- (WIND)/.12

- (IPI)/.29

- (GCO)/1.05

Economic Releases

8:30 am EST

- Final 4Q Non-farm Productivity is estimated to rise 1.0% versus a 3.2% prior estimate.

- Final 4Q Unit Labor Costs are estimated to rise 3.8% versus a prior estimate of a 1.8% increase.

- Initial Jobless Claims for last week are estimated to fall to 650K versus 667K prior.

- Continuing Claims are estimated to rise to 5155K versus 5112K prior.

10:00 am EST:

- Factory Orders for January are estimated to fall 3.5% versus a 3.9% decline in December.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Lockhart speaking, Geithner Testimony Before House Budget Cmte on FY10 Treasury Budget, ICSC Chain Store Sales for February, 4Q Mortgage Delinquencies, weekly EIA nat gas inventory report, (CUB) analyst meeting, (WTW) investor day, (XOM) analyst meeting, (CTCT) analyst meeting and the Keefe Bruyette Woods Regional Bank Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and construction stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Finish Higher Boosted By Commodity, Construction, HMO and Technology Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Futures
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Surging into Final Hour on Less Economic Pessimism, Diminishing Financial Sector Worries, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Technology longs, Retail longs and Biotech longs. I covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, sector performance is mostly positive and volume is above average. Investor anxiety is also above average. Today’s overall market action is bullish. The VIX is falling 10.15% and is elevated at 45.77. The ISE Sentiment Index is low at 95.0 and the total put/call is high at 1.02. Finally, the NYSE Arms has been running high most of the day, hitting 1.64 at its intraday peak, and is currently 1.42. The Euro Financial Sector Credit Default Swap Index is falling 4.66% today to 156.33 basis points. This index is still below its all-time high of 164.0 on Feb. 24^th. The North American Investment Grade Credit Default Swap Index is rising .94% to 243.0 basis points. This index is still well below its Dec. 5^th record high of 285.99. The TED spread is rising .73% to 103 basis points. The TED spread is now down 360 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 3.97% to 72.0 basis points. The Libor-OIS spread is falling .01% to 102.0 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis point to .95%, which is down 169 basis points since July 7th. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .25%, which is down 2 basis points today. Stocks globally are rising on optimism over the possibility of a rebound in the Chinese economy. As well, a few minutes ago Reuters reported that the House Financial Services Sub-committee is holding a hearing on March 12^th related to mark-to-market accounting. I have said in the past that revising this rule would result in a large financial sector rally. I am surprised the stocks aren’t up more on the news. If the rule isn’t revised, today’s gains will likely evaporate over the coming weeks. For today’s rally to have staying power, financials must at least participate. Nikkei futures indicate an +200 open in Japan and DAX futures indicate a +29 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic pessimism, more shorting, diminishing financial sector worries, bargain-hunting and short-covering.

Today's Headlines

Bloomberg:

- The proposed tax increase on stocks and derivatives trading that is intended to help pay for the Wall Street bailout would have a “severe impact” on investors, NYSE Euronext Chief Executive Officer Duncan Niederauer said. “It would decimate liquidity in the market in an unprecedented way,” he said late yesterday at the Museum of American Finance in New York. “That would be about the worst thing that could happen, but I don’t believe it will get any traction.” Representative Peter DeFazio, an Oregon Democrat, introduced legislation last month that would require exchanges to collect a tax equal to 0.25 percent of a trade’s value. The proposal, backed by seven other Democratic representatives, could raise $150 billion a year to mitigate the costs of the U.S. Treasury’s rescue plan for banks and brokerages, according to the Feb. 13 draft of the legislation.

- The Obama administration set loan modification guidelines for its $75 billion homeowner rescue plan, agreeing to pay lenders for altering troubled mortgages while reducing borrowers’ interest rates to as low as 2 percent. The voluntary initiative, announced on Feb. 18, would require applicants to fully document their income with pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” according to documents released by the U.S. Treasury in Washington today. The second, larger part of the plan relies on government-run Fannie Mae and Freddie Mac to refinance loans.

- Steve Leuthold, whose Grizzly Short Fund returned 74 percent last year betting against U.S. stocks, said now is the time to buy equities because investors are too fearful about the economy. “These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid,” he told Bloomberg Television in an interview today. “We’ve been in much worse, much more panicked and more scary situations in the U.S.” The economy isn’t as bad as it was in 1974, when stocks began rebounding, said Minneapolis-based Leuthold. He predicted the Standard & Poor’s 500 Index will surge to at least 1,000 in 2009, representing a gain of 44 percent from yesterday’s 12-year low of 696.33. Because a rally is likely, Leuthold said investors shouldn’t buy his Grizzly Short Fund. It has returned 26 percent in 2009. The Leuthold Core Investment Fund, which bets on stock gains, is most concentrated in biotechnology companies, automotive retailers and education providers, he said. (video)

- General Electric Co.(GE) shares dropped below $6 for the first time since December 1991, plunging as much as 18 percent in its fourth straight day of declines on investor concerns its finance unit may require more capital. GE fell 41 cents, or 5.8 percent, to $6.60 at 11:07 a.m. in New York Stock Exchange composite trading. Earlier the shares traded as low as $5.73. The shares are being driven down by selling by sovereign wealth funds anticipating a downgrade of the company’s AAA credit rating, and that’s also pushing its credit-defaults swaps higher, Pacific Investment Management Co.’s Bill Gross said in an interview on CNBC.

- India’s iron-ore exports in March will slump as China, the world’s largest consumer of the steel- making raw material, reduces purchasing after stockpiles rose. “Demand has dried up since the last week of February,” Rahul Baldota, president of the Federation of Indian Mineral Industries, said in a telephone interview today. Indian iron ore prices have fallen by $15 from $85 a ton in February, he said.

- Crude oil rose for a second day on speculation China will broaden efforts to boost economic growth, bolstering fuel demand in the world’s third-largest economy.

- Bridgewater Associates Inc., run by Ray Dalio, overtook JPMorgan Chase & Co. to become the biggest U.S. manager of hedge-fund assets, according to a survey. Bridgewater managed $38.6 billion on Jan. 1, according to Absolute Return magazine. JPMorgan ranked second after losing $11.8 billion in hedge fund assets in the second half of 2008, leaving the New York-based bank with $32.9 billion. Paulson & Co. rose to third place from fourth even as the New York-based firm’s assets declined to $29 billion from $34.4 billion, according to the magazine. The total value of U.S. hedge funds that managed at least $1 billion each fell 32.3 percent in the second half to $1.1 trillion, according to Absolute Return, which is published by London-based HedgeFund Intelligence.

- China’s exporters are calling on the government to weaken the yuan after the biggest slump in overseas sales in more than a decade, putting them on a collision course with the central bank’s intent on keeping the currency stable. “A 2 to 3 percent depreciation in the yuan against the dollar would help as we are on the line between life and death,” Wang Hanmin, a sales manager at Yixing Bochangyuan Garments Co. in Jiangsu province, said at the East China Trade Fair in Shanghai this week.

Wall Street Journal:

- Amazon.com Inc.(AMZN) plans to release a program Wednesday for reading electronic books on Apple Inc.'s(AAPL) iPhone, extending Amazon's sales of digital books to devices beyond its Kindle e-book reader. Amazon's software application, which can be downloaded free of charge, allows iPhone and iPod Touch users to read books or periodicals purchased on the Web or through their dedicated Kindle device, usually for $9.99.

- President Barack Obama told AFL-CIO union leaders Tuesday in a videotaped address that the controversial Employee Free Choice Act will pass, signaling his full backing for legislation that makes union organizing easier. "We will pass the Employee Free Choice Act," President Obama told more than 100 top labor officials in a closed-door meeting at the labor federation's winter gathering in Miami, according to people at the meeting. The bill would make it easier for unions to recruit workers because it would let them join unions simply by signing cards rather than through secret-ballot elections in which companies can campaign against the union. The U.S. Chamber of Commerce and other business organizations have been campaigning against the legislation.

- The Wall Street stages of grief go something like this: Anger, bargaining, acceptance, tell-all biography. Deal Journal exclusively brings you two detailed excerpts from House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William D. Cohan, to be published in March, 2009 by Doubleday, a division of Random House, Inc. Cohan brings lively quotes about the tensions surrounding the death of Bear Stearns.

NY Times:

- The A.F.L.-C.I.O.’s executive council will call on the Obama administration on Wednesday to speed the nationalization of problem banks to stimulate lending and lift the sagging economy. The labor federation, a lobbying powerhouse that represents 10 million workers, will thus become one of the first groups — and certainly the most powerful — to call for moving more aggressively on nationalization, both to counter Republican and business cries against it and to press the Obama administration not to vacillate over such a move.

- Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering. So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.

NJ.com:

- Chris Christie, the leading Republican challenger in the New Jersey November gubernatorial election, leads Gov. Jon Corzine in a head-to-head matchup, with 41 percent favoring Christie and 32 percent for Corzine.

Detroit Free Press:

- On the eve of Fiat CEO Sergio Marchionne’s meeting with the presidential automotive task force to discuss his company’s proposed alliance with Chrysler, the Italian automaker unveiled a new engine technology it says can reduce fuel consumption as much as 25%. The system is expected to be available to all Fiat’s current and future partners, including Chrysler, Fiat powertrain chief Alfredo Altavilla said at Geneva's annual auto show. The first engine using the system goes on sale in the Alfa Romeo MiTo sporty compact in Europe later this year.

electronista:

- Nearly one quarter of US phones are smartphones and are driven by trends the iPhone put in place, findings from the NPD Group show. About 23 percent of phones fit into the advanced category by the end of 2008, or double the share of a year earlier. Exactly half of these were touchscreen devices, a feat which NPD directly credits to Apple popularizing the format through the iPhone and pushing other carriers and phone makers to follow suit.

Vanity Fair:

- The five hotshots who took Fortress Investment Group public were worth billions at first. Today they look like arrogant showboats, and their story helps explain why hedge funds are imploding by the thousands—and why there’s still a truckload of money to be made.

Reuters:
- OPEC's president Angola considers the group should not cut output when it meets on March 15 and instead take more time to assess the impact of record curbs made so far, while for others, it it too soon to tell, OPEC sources said on Wednesday. Although it holds the presidency, Angola has only been a member of OPEC since 2007 and independent observers have said its compliance with output curbs has been less strict than that of core Gulf producers. If prices, which are hovering above $40 a barrel, stay low, one source in the group said the Organization of the Petroleum Exporting Countries would call an extra meeting, rather than cut again in March.

Les Echos:

- France’s public debt may rise to 74% of GDP in 2009 and 77.5% of GDP in 2010, up from 67% last year.

Interfax:

- Russia increased its forecast for unemployment this year and now expects as many as 2.8 million people to be officially registered as jobless, citing Health Minister Tatiana Golikova. The previous forecast was for 2.2 million people to be officially registered as unemployed. The number of unemployed, both registered and unregistered, is currently more than 6.1 million.

Arabian Business.com:

- A Dubai-based developer has reduced the price of its properties by as much as 30 percent as a result of falling property prices across the UAE.

Bear Radar

Style Underperformer:
Small-cap Value (+1.33%)

Sector Underperformers:
Banks (-5.40%), Education (-4.81%) and Gaming (-4.46%)

Stocks Falling on Unusual Volume:
GMXR, IOC, USB, JPM, CECO, DV, POT, AXP, MANT, AFAM, RATE, GYMB, APOL, FAST, WGOV and MMP

Stocks With Unusual Put Option Activity:
1) LEN 2) DTV 3) SCHW 4) JOYG 5) SHW

Bull Radar

Style Outperformer:
Mid-cap Growth (+3.39%)

Sector Outperformers:
Steel (+8.62%), Construction (+7.20%) and Semis (+5.63%)

Stocks Rising on Unusual Volume:
NIHD, ARD, FCX, DNR, USMO, CLF, STO, TOT, NETL, HANS, FMX, APA, JOYG, SHOO, DRIV, GENZ, CBRL, USMO, IDCC, BIDU, PCAR, SOHU, XLNX, WPPGY, SNDA, CMED, ALTR, AIPC, AVAV, NUVA, MGG, IGN, XSD, WBD, BIG, GB, MTZ and MET

Stocks With Unusual Call Option Activity:
1) PMCS 2) CA 3) BX 4) WDC 5) JNPR