Stocks Soaring into Final Hour on Less Financial Sector Pessimism, Less Extreme Economic Fear, Short-Covering, Buyout Speculation

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Education longs, Medical longs, Biotech longs and Retail longs. I added to my (ILMN) and (GILD) longs and took profits in another long today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Investor anxiety is about average. Today’s overall market action is very bullish. The VIX is falling 6.37% and is very high at 40.83. The ISE Sentiment Index is below average at 129.0 and the total put/call is below average at .74. Finally, the NYSE Arms has been running around average most of the day, hitting 1.35 at its intraday peak, and is currently .73. The Euro Financial Sector Credit Default Swap Index is rising 1.05% today to 192.66 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 2.24% to 244.55 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is rising .84% to 112 basis points. The TED spread is now down 351 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is plunging 9.69% to 65.25 basis points. The Libor-OIS spread is falling .84% to 106.0 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 10 basis points to 1.0%, which is down 164 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 .20%, which is down 2 basis points today. The methodical grind higher today is much healthier than a gap and then flat-line. Breadth is very good. The action in financials remains a huge positive. Much of this rally is predicated on the assumption that mark-to-market will at the very least be relaxed and possibly even temporarily suspended. As well, talk of bringing back the uptick rule is a large psychological positive for investors. The AAII % Bulls rose to 27.64% this week, while the % Bears fell to 54.47%. Overall, investors remain overwhelmingly bearish. However, I would still like to see a few other technical indicators, such as the total put/call, display more investor angst. The 10-year T-note is trading as if it is about to break out again. Large specs are the most net short the 10-year since August of last year and much talk of a bond bubble still persists. We have had a large rally in stocks and some better economic data, yet the 10-year is firm. Asian equities should see sharp gains tonight. Nikkei futures indicate an +300 open in Japan and DAX futures indicate an +32 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, declining credit market angst, bargain-hunting, buyout optimism, better investor psychology, less extreme economic fear and diminishing financial sector pessimism.

Today's Headlines

Bloomberg:

- Sales at U.S. retailers in February fell less than forecast and a gain in January exceeded the previous estimate, indicating the biggest part of the economy may be starting to stabilize. The Commerce Department’s figures mean the decline in gross domestic product this quarter will probably be less than anticipated. Retail purchases decreased by 0.1 percent following a 1.8 percent jump in January, the Commerce Department said today in Washington. Excluding cars, sales climbed 0.7 percent. Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales increased 0.5 percent, after rising 1.7 percent. In addition to service stations, clothing, furniture, electronics and department stores showed gains in sales.

- President Barack Obama’s proposal for spending $634 billion on revamping U.S. health care threatens to expand a “bloated” system, the chairman of the Senate Budget Committee said. “This is an area that gives many of us great pause, because we are already spending one in every six dollars in this economy on health care,” said the chairman, Democrat Kent Conrad of North Dakota, at a hearing today of his committee. About 30 percent of the $2.5 trillion the U.S. is projected to spend on health care this year may be “wasted” because of unneeded treatments, White House budget director Peter Orszag told the Senate Finance Committee on March 10.

- Bank of America Corp.(BAC), bolstered by $50 billion in profit before taxes and provisions this year, isn’t likely to need more aid when the U.S. completes its “stress test,” Chief Executive Officer Kenneth Lewis said.

- Billionaire Warren Buffett said Berkshire Hathaway Inc. plans to sell more derivative contracts, a tactic some investors have said may cause the insurer to suffer billions of dollars in losses. “Oh, we’ll continue,” he said in a Bloomberg Television interview, portions of which will be broadcast today and tomorrow. “We do anything that I think I understand and where I think that the odds strongly favor making money, which doesn’t mean you make money every time.”

- K+S AG, Europe’s largest producer of potash used in fertilizers, forecast “significantly” lower earnings this year as farmers delay purchases, betting prices may decline later in the year. Profit from thawing salt will improve, yet not enough to counter the deterioration in potash and nitrogen volumes, the Kassel, Germany-based company said today. K+S, which previously flagged 2009 as an “opportunity” for growth, fell 11 percent. OAO Uralkali, Russia’s second-largest producer of potash, cut prices of the mineral last week for the first time since 2006. “There’s a clear buyers strike in the market,” Christian Faitz, a Frankfurt-based analyst at Sal. Oppenheim Jr & Cie said by telephone today. “Farmers are saying ‘we don’t want to pay those prices.’ We don’t know when, or if, they will ever start paying those prices again.” Faitz rates K+S “neutral.”

- General Electric Co.(GE) and its finance arm lost the top-level AAA rating from Standard & Poor’s that they’ve held since 1956 as a global recession sapped earnings and exposed potential risks. The one-level downgrade to AA+ with a “stable” outlook affects long-term debt, S&P analysts said in a statement today. Under debt guarantees and covenants, GE would have had to post additional collateral if the ratings fell below AA-.

- Gilead Sciences Inc.(GILD) agreed to buy CV Therapeutics Inc.(CVTX) for about $1.4 billion to gain chest-pain and heart drugs, topping a hostile offer from Japan’s Astellas Pharma Inc. Gilead, based in Foster City, California, will pay $20 a share for CV Therapeutics, of Palo Alto, California, the companies said today in a statement. The offer beats a $16-a- share bid from Astellas, which began a tender offer on Feb. 27 after rejections by the CV Therapeutics board.

- Wall Street employees’ base salaries may double as bonuses, which can account for the bulk of pay for bankers and traders, shrink, said Alan Johnson, who runs a compensation consulting firm. Base salaries have ranged from about $80,000 to $300,000, with bonuses often climbing into the millions of dollars, Johnson said. Now, he says employees who received $250,000 in base salary may get an increase to $500,000 or $600,000.

- Bernard Madoff was jailed after admitting he masterminded the largest Ponzi scheme in history, an epic swindle that may have reached $65 billion and made him the symbol of investor distrust in a global recession. Madoff, 70, entered his guilty plea in Manhattan federal court three months after confessing to relatives that his firm, Bernard L. Madoff Investment Securities LLC, was “one big lie.” U.S. District Judge Denny Chin ordered that Madoff, who has been free on $10 million bond, should be jailed while awaiting sentencing, scheduled for June 16. He faces as much as 150 years in prison.

- Russia’s ruble plunged the most in almost three weeks against the dollar as Russia’s largest privately owned bank forecast a 20 percent depreciation and the price of oil continued to decline. The currency slid as much as 1.2 percent to 35.3956 per dollar today, its biggest drop since Feb. 20. The ruble may decline as much as 20 percent this year against the target basket used to manage its fluctuations, as banks convert funds provided by the government into foreign currency, Moscow’s Alfa Bank said.

- Treasury Secretary Timothy Geithner pushed Group of Seven officials to soften criticism of China last month, according to a person briefed on the matter, after his accusation that the nation was “manipulating” the yuan strained ties with the U.S.’s second-biggest trading partner.

- General Motors Corp.(GM), citing gains from stepped-up cost cutting, said it told President Barack Obama’s autos task force that the carmaker won’t need $2 billion of U.S. aid requested by month’s end to survive. “This development reflects the acceleration of GM’s companywide cost-reduction efforts as well as proactive deferrals of spending previously anticipated in January and February,” GM Chief Financial Officer Ray Young said in a statement, without providing new timing on its borrowing needs.

- Bernard Madoff has “killed the hedge fund” because investors will demand greater transparency on where their money goes, the head of the $60 billion Qatar Investment Authority said. “For the next three years it will be very difficult and literally the game will change,” the fund’s Executive Director Hussain Ali Al-Abdullah told the Wharton Business School Global Alumni Forum in Dubai today. The Abu Dhabi Investment Authority, the world’s biggest sovereign fund, had $400 million invested with Madoff at one point, the New York Times said in December.

- OAO Novolipetsk Steel Chairman Vladimir Lisin said demand in China may dip after a “small revival.” There are “positive dynamics” on export markets, while the Russian steel market is stagnant, Lisin told reporters in Moscow today.

- Palm oil futures may tumble as much as 23 percent this year because of lower energy prices and increasing vegetable oil supplies, according to analyst forecasts at an industry conference in Kuala Lumpur.

- Crude oil rose for the first time in three days before OPEC meets this weekend to consider a fourth production cut. Algerian Energy Minister Chakib Khelil said yesterday that OPEC is likely to reduce output again at its meeting.

Wall Street Journal:

- The Commodity Futures Trading Commission is planning to re-evaluate how it grants so-called hedge exemptions to futures traders seeking to exceed speculative position limits. The decision to open the issue for discussion comes after months of criticism leveled against the agency by lawmakers and some policy experts who said the CFTC's lack of action to rein in excessive speculation propelled the record-high oil and ...

- Investors who hold billions of dollars of residential mortgage-backed securities are pressing the Obama administration to make changes in its housing rescue plan. Participation by these investors will help determine the success of President Barack Obama's $75 billion plan to reduce foreclosures and help stabilize the housing market. But many investors are critical of features of the program and have been meeting with Treasury officials in an effort to influence parts of the plan, such as how it treats second mortgages.
- And the 20 Richest Men in Finance Are…

MarketWatch:
- Legislators and regulators need to take action immediately to change controversial mark-to-market accounting rules, which require daily revaluing of assets such as mortgage-backed securities and credit default swaps, a bipartisan group of lawmakers said Thursday. "We must correct the rules to prevent gross distortions," said Rep. Paul Kanjorski, D-Penn., chairman of the House Securities Subcommittee, at a hearing to discuss the regulations.

Boston Globe:

- Six months after the first CVS(CVS) MinuteClinics opened in the state, thousands of Massachusetts residents have visited the in-store clinics for treatment of sore throats, bronchitis, and the flu. With MinuteClinics opening at a rate of more than two a month in the state, company executives said they have taken off here faster than in the 24 other states where the company owns clinics. Nurse practitioners at the 16 Massachusetts clinics open so far have treated more than 10,000 patients with acute problems and given about 10,000 flu shots, the executives said.

Washington Post:

- With President Obama's plan to tax the rich to pay for health care facing deep skepticism on Capitol Hill, key lawmakers are pressing a different way to raise money: taxing the health benefits workers receive from their employers. So far, administration officials have been careful not to endorse the idea, which Obama blasted as a major tax increase last year after Sen. John McCain (R-Ariz.) made it the centerpiece of his presidential campaign's health plan. But the president hasn't slammed the door on it, either.

ESPN.com:

- During his campaign for Delaware Governor last fall Jack Markell often hinted that, if elected, he'd support sports betting in his state. Now that he's got the job, Markell is done hinting. ESPN The Magazine has learned that sometime next week, according to a statehouse source, Markell will introduce a proposal which, for the first time in more than 30 years, makes gambling on sports legal east of the Mississippi River.

AppleInsider:

- Apple(AAPL) is exploring the possibility of including a wireless "remote wand" with future versions of its Apple TV media system that would provide users with precise control over a cursor on the Apple TV screen in very much the same way a conventional mouse controls a cursor on a PC. It would also unlock three-dimensional controls similar to those offered by Nintendo's Wii controller.

Google Blog:

- Here comes Google(GOOG) voice. We've just started to release a preview of Google Voice, an application that helps you better manage your voice communications. Google Voice will be available initially to existing users of GrandCentral, a service we acquired in July of 2007.

Politico:

- President Barack Obama announced new steps Wednesday to rein in pork barrel spending by Congress, but his failure to specify real cuts could come back to haunt him in the larger fight over his ambitious budget plans this spring. “Nobody’s going to believe it’s real until they see an example,” Rep. Jim Cooper (D-Tenn.) said, urging Obama to follow up soon with specific rescissions singling out wasteful projects to be terminated. And the risk for the president is that he appears hemmed in by the old power structure in Congress just when he is trying to speak to a larger audience in the country about the challenges ahead.

CBSNews.com:

- President Obama said he would consider deploying National Guard troops to control violence along the US-Mexico border during an interview Wednesday. "I don't have a particular tipping point in mind," he continued. "I think it's unacceptable if you've got drug gangs crossing our borders and killing U.S. citizens." The potential deployment comes amid reports that approximately 1,000 people have been killed along the contentious border in the first three months of 2009. Increased violence in northern Mexican towns has been attributed to battles that have broken out following Mexican President Felipe Calderon order of a crackdown on drug cartels.

Reuters:
- Bank of America Corp's (BAC) chief executive said on Thursday it would be a "nightmare" for U.S. banks to be nationalized, wiping out shareholders and perhaps bondholders, and further damaging an economy that might begin to recover as soon as this year. Speaking to the Chief Executive Officers Club of Boston, CEO Kenneth Lewis also said he is confident that Bank of America, the largest U.S. bank, will pass the government's pending "stress test," and would not need more government capital. Bank of America took $45 billion from the U.S. Treasury Department's Troubled Asset Relief Program (TARP), including some funds in a January bailout to help absorb debt-ravaged Merrill Lynch & Co.

- The U.S. Treasury sold $11 billion worth of 30-year long bonds on Thursday in an extraordinarily well received auction that calmed some worries over the government's massive borrowing spree. "It was great," Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco, said about the auction.

- Apple(AAPL) will hold an event next Tuesday to preview new software for the iPhone, the company said. Apple said in an email invitation on Thursday that it will provide a "sneak peek" at the iPhone 3.0 software, along with information about the new software kit that third-party vendors use to create applications for the device. The company will host the event at its corporate campus in Cupertino, California, on March 17.

Webstock.com:

- China’s copper output rose 11% to 606,000 metric tons in the first two months of 2009 from a year earlier, citing data from the National Bureau of Statistics. Production was 320,000 tons in February.

Bear Radar

Style Underperformer:
Large-cap Growth (+1.70%)

Sector Underperformers:
Steel (-2.52%), Coal (-.78%) and Software (-.68%)

Stocks Falling on Unusual Volume:
SCHN, X, KALU, CLF, COP, NAFC, SINA, FSYS, PLL, JAS and KYE

Stocks With Unusual Put Option Activity:
1) STLD 2) TYC 3) SOHU 4) SINA 5) HMY

Bull Radar

Style Outperformer:
Large-cap Value (+2.56%)

Sector Outperformers:
HMOs (+5.26%), Disk Drives (+4.27%) and Biotech (+4.04%)

Stocks Rising on Unusual Volume:
CVTX, CELG, TI, PFE, CHU, ABT, TYC, SNP, SI, CTSH, APA, AXYS, ICFI, SMTS, JOSB, GENZ, DRIV, AIRM, ESRX, CRXL, POWI, TLP, DNA, MW, GLP, KSP, BGH, BKE, ABC, MCK, IBB, BRP, PVH and XSD

Stocks With Unusual Call Option Activity:
1) FMCN 2) TYC 3) DAL 4) S 5) WRC

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Thursday Watch

Late-Night Headlines
Bloomberg:

- Jamie Dimon, chief executive officer of JPMorgan Chase & Co.(JPM), said the U.S. can rescue its banking system by the end of the year if officials start cooperating and stop the “vilification” of corporate America. “When I hear the constant vilification of corporate America, I personally don’t understand it,” Dimon said in his speech. “I would ask a lot of our folks in government to stop doing it because I think it’s hurting our country.” Dimon said he was “very optimistic” about JPMorgan and its ability to work through the financial crisis.

- Freddie Mac, the mortgage-finance company thrust into a leading role in President Barack Obama’s homeowner rescue plans, said it will tap an additional $30.8 billion in federal aid after loan holdings and other assets deteriorated. More capital may be needed, and the $200 billion in total financing pledged by the U.S. Treasury may not be enough, the McLean, Virginia-based company said today in a Securities and Exchange Commission filing.

- EBay Inc.(EBAY) expects its PayPal online- payment system to become the company’s biggest moneymaker as the business outpaces growth in its Internet marketplace. PayPal aims to overtake credit-card companies and become the top processor of online payments globally, company executives said today in a meeting with investors in San Jose, California.

- Discrimination claims filed with the U.S. Equal Employment Opportunity Commission last year rose to the highest in the agency’s 44-year history, after a Supreme Court ruling that changed the way complaints may be filed. A record 95,402 claims were filed during the year ended Sept. 30, the EEOC said. That was 15 percent more than in 2007. More than 25 percent of claims filed contained an allegation of age discrimination while more than 34 percent of the filings included complaints of retaliation, according to the agency.

- U.S. regulators sued investment firms in California and Virginia for running Ponzi schemes totaling $51 million, adding to a list of alleged frauds exposed after the Dec. 11 arrest of money manager Bernard Madoff.

- Wilbur Ross, the billionaire investor, said regulation isn’t the key to solving the U.S. financial crisis and may have contributed to the problem. Government responses that were “panicky” and mistakes in monetary and fiscal policy contributed to a “crisis in confidence,” Ross said in an interview today on Bloomberg Television. “I’m not sure that the answer is more regulation,” said Ross, chairman and chief executive officer of New York-based WL Ross & Co. “That sounds more like a political solution than a real solution to me.”

- The yen will fall to a five-month low versus the US dollar and weaken against the euro as Japan’s currency loses its appeal as a refuge and the economy contracts 6.1 percent, Goldman Sachs Group Inc. said. The currency will decline 7.2 percent to 105 per U.S. dollar and weaken by 8.5 percent to 136.5 per euro, the bank said, revising earlier three-month forecasts for 90 and 117, respectively.

- Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, advanced to a record, according to figures on the company’s Web site. The fund held 1,038.17 metric tons of bullion as of yesterday, up 0.9 percent from March 10. The fund’s holdings are just behind the 1,040.1 tons held by Switzerland, the sixth- largest stockpile.

- China’s agricultural prices may fall further this year, slowing growth in rural incomes in the world’s most populous nation, said a government official. “The pressure from declining agricultural prices is high,” Yin Chengjie, vice chairman of agricultural and rural affairs of the National People’s Congress, said in Beijing at China’s annual parliament meeting. “We cannot be optimistic about growth” in farm incomes this year, he said. Prices of agricultural products, including cotton, soybeans and corn have fallen in China after bumper harvests while restaurant sales and output in food processing declined. Collapsing exports have dragged the world’s third-largest economy to its weakest growth in seven years, costing the jobs of 20 million rural migrant workers and raising concerns of social unrest.

- Global cotton consumption this year will be lower than forecast in February as a deteriorating economy reduces purchases from textile mills worldwide, the U.S. government said. World use will total 111.1 million bales in the marketing year ending July 31, down 1.3 percent from 112.6 million forecast in February, the Department of Agriculture said today in a report. The figure is 9.5 percent less than last season, the largest drop in at least 71 years, USDA data shows. The agency has cut its estimate for nine straight months. Reports from various Asian mills suggested a decline larger than 9 percent, Sharon Johnson, a senior cotton analyst at First Capitol Group in Atlanta, said before today's report.

- The Defense Department is closely monitoring possible North Korean preparations for a ballistic missile test, department spokesman Geoff Morrell said. The U.S. would view any such test as a violation of a United Nations resolution, Morrell said today at a Pentagon briefing. That would be the case even if the missile is used to launch a satellite into space because of the “dual-use” nature of the technology involved, Morrell said.

Wall Street Journal:

- Is Warren Buffett Wrong? Four Reasons the Recession May Be Easing. President Obama’s favorite deal maker has offered more morose pronouncements on the recession. You might recall that in April 2008, after the fall of Bear Stearns, Buffett predicted the recession would be worse than feared. This week, he upped the ante, calling the recession “an economic Pearl Harbor,” and suggesting it would last for five more years, or longer than World War II. (Of course, Buffett may be going by the old saw that a recession is when your neighbor loses your job and a depression is when you lose yours; the Oracle lost over $5 billion last year in the worst performance in his 44 long years in the business.)

- U.S. President Barack Obama and Treasury Secretary Timothy Geithner received failing grades for their efforts to revive the economy from participants in the latest Wall Street Journal forecasting survey. The economists' assessment stands in stark contrast with Mr. Obama's popularity with the public, with a recent Wall Street Journal/NBC poll giving him a 60% approval rating. A majority of the 49 economists polled said they were dissatisfied with the administration's economic policies. On average, they gave the president a grade of 59 out of 100, and although there was a broad range of marks, 42% of respondents rated Mr. Obama below 60. Mr. Geithner received an average grade of 51. Federal Reserve Chairman Ben Bernanke scored better, with an average 71. Economists' main criticism of the Obama team centered on delays in enacting key parts of plans to rescue banks. "They overpromised and underdelivered," said Stephen Stanley of RBS Greenwich Capital. "Secretary Geithner scheduled a big speech and came out with just a vague blueprint. The uncertainty is hanging over everyone's head." Mr. Geithner unveiled the Obama administration's plans Feb. 10, but he offered few details, and stocks sank on the news. The Dow Jones Industrial Average is down almost 20% since the announcement, as multiple issues have weighed on investors' confidence. The economists didn't just single out the U.S. for criticism; 70% of participants said the response of governments around the world to the global recession has been inadequate. "The Europeans or Japanese don't seem to be doing near enough to kickstart their economies," said Nariman Behravesh of IHS Global Insight.

MarketWatch.com:
- The Republican Study Committee, a group of conservative GOP lawmakers, believe that instead of pumping billions to bail out banks, lawmakers could save the economy by simply eliminating controversial mark-to-market accounting rules, which require daily revaluing of assets. The panel's effort failed last year as Congress approved $700 billion for banks in October. However, seven months later, their efforts seem to be advancing on Capitol Hill. Indeed, even fierce opponents to changing the methodology are now beginning to think about some mark-to-market alternatives. As the markets continue to slide, pressure is building in Washington to find a bipartisan consensus on the issue. The first step is a hearing Thursday, hosted by House Securities Subcommittee Chairman Paul Kanjorski, D-Penn.

NY Times:

- Since Mr. Tian migrated from China’s Sichuan province, the multibillion-dollar recycling industry has gone into a nosedive because of the global economic crisis and a concomitant fall in commodity prices. Bottles now sell for half of what they did in the summer. “Even trash has become worthless,” Mr. Tian said recently as he made his way to a collection center, his sacks nearly bursting.

Forbes.com:
- The richest people in the world have gotten poorer, just like the rest of us. This year the world's billionaires have an average net worth of $3 billion, down 23% in 12 months. The world now has 793 billionaires, down from 1,125 a year ago. After slipping in recent years, the U.S. is regaining its dominance as a repository of wealth. Americans account for 44% of the money and 45% of the list's slots, up seven and three percentage points from last year, respectively. Bill Gates lost $18 billion but regained his title as the world's richest man. Warren Buffett, last year's No. 1, saw his fortune decline $25 billion as shares of Berkshire Hathaway fell nearly 50% in 12 months.

Washington Post:

- U.S. engineers have found a way to make lithium batteries that are smaller, lighter, longer lasting and capable of recharging in seconds. The researchers believe the quick-charging batteries could open up new applications, including better batteries for electric cars. And because they use older materials in a new way, the batteries could be available for sale in two to three years, a team from Massachusetts Institute of Technology reported on Wednesday in the journal Nature.

IBD:

- California helped lead the country into the housing debacle. Could it now be leading the nation out? Existing-home sales in the Golden State doubled in January from a year ago, pacing an overall 29% gain in the West. Meanwhile, the time it would take to sell the inventory of California homes at the current sales rate dived to 6.7 months from 16.6 months a year ago. That's close to the five or six months' supply deemed consistent with a stable market, and well below the nationwide figure of 9.6 months.

Politico:

- Caught between Big Business and Big Labor in the midst of a deepening recession, moderate Democrats are washing their cars, polishing their silver, rearranging the pictures on their desks — anything they can do to buy some time while hoping that EFCA somehow goes away. Eleven Democratic senators and 22 Democratic House members who cosponsored the 2007 version of EFCA — or “card check,” as its opponents call it — have steered clear of the version unveiled this week by Education and Labor Committee Chairman George Miller (D-Calif.) and Sen. Tom Harkin (D-Iowa).

Miami Herald:

- South Carolina Gov. Mark Sanford on Wednesday became the first governor to reject some of his state's share of President Barack Obama's economic stimulus money, spurning $700 million that he said would harm his state's residents in the long run. Sanford, a Republican who served in Congress in the 1990s, made his announcement at three sites across South Carolina in a daylong flight tour that fed speculation that he's eyeing a 2012 presidential run. He says that the $700 million he's turning down would harm his state's residents in the long run by increasing the federal budget deficit and building expectations for government programs that can't be sustained.

Boston Globe:

- An executive at Lowe's Cos. Inc.(LOW) said the home improvement chain hopes to grow its fleet of stores by 50 percent -- though it could take a decade. Larry Stone, the company's president and chief operating officer, told analysts at the Raymond James Institutional Investors Conference on Wednesday that officials at the chain believe it can expand its U.S. store operations to include 2,400 sites. The company now operates about 1,650 stores in the U.S.

Reuters:

- The regulator for some of the biggest U.S. banks expressed opposition on Wednesday to suspending mark-to-market accounting rules to value bank assets, but said some tweaks might be needed. Kevin Bailey, deputy comptroller of the currency, said in prepared testimony for a congressional hearing on Thursday that the accounting rules, also called fair value, provides the best estimate of the value of many types of financial instruments as of the measurement date. "While additional steps can and should be taken to enhance existing standards, the OCC believes that it is inappropriate to suspend current fair value measurement," Bailey said. Fair value rules have led to huge write-downs of mortgage- related securities and other instruments at banks at a time when markets are thin or nonexistent for some assets. Write-downs can reduce earnings and affect regulatory capital.

- The global economy is on track for its worst recession since the 1930s with output likely to shrink by 1-2 percent this year, World Bank President Robert Zoellick told the Daily Mail newspaper. Central and eastern European countries were particularly vulnerable, he said, urging rich nations to do more to fill the financing gap left by an exodus of capital from the developing world.

The Independent:
- Hedge funds have resumed the practice of short-selling UK financial stocks with a vengeance in recent weeks, raking in billions of pounds by betting on share price falls at banks and insurers since an FSA-imposed ban expired in mid-January. While the strategy faces a crackdown worldwide as countries try to stabilize their financial systems, funds such as Odey and Lansdowne are piling into trades in UK financial companies. Both banks and insurers face additional strain on their finances and the possible need for more share issues in coming months.

Xinhua News Agency:

- China National Petroleum Corp. has started work at the Al-Ahdab oilfield in Iraq. China National Petroleum will explore and develop the field in the next 23 years and boost the field’s output to 110,000 barrels a day in six years, it said.

Late Buy/Sell Recommendations
Citigroup:

- Rated (SHW) Buy and (ETFC) Sell.

- Reiterated Sell on (AXP), target $9.

Night Trading
Asian Indices are -1.75% to -.25% on average.
S&P 500 futures -.69%.
NASDAQ 100 futures -.67%.

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Earnings of Note
Company/EPS Estimate
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Economic Releases

8:30 am EST

- Advance Retail Sales for February are estimated to fall .5% versus a 1.0% gain in January.

- Retail Sales Less Autos for February are estimated to fall .1% versus a .9% gain in January.

- Initial Jobless Claims for last week are estimated to rise to 644K versus 639K the prior week.

- Continuing Claims are estimated to rise to 5140K versus 5106K prior.

10:00 am EST

- Business Inventories for January are estimated to fall 1.0% versus a 1.3% decline in December.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly EIA natural gas inventories report, Oppenheimer Alternative Energy Conference, Bank of America Consumer Conference, (IT) investor day and the (ITT) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and automaker 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.