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Wednesday Watch

Late-Night Headlines
Bloomberg:

- The Federal Reserve’s requests from borrowers for loans to buy asset-backed securities fell 64 percent from last month as investors balked at visa limits and possible political efforts to tax earnings. Investors sought $1.71 billion from the Term Asset-Backed Securities Loan Facility to purchase securities backed by auto and credit-card loans, the New York Fed bank said today on its Web site. The Fed provided $4.7 billion in loans last month to purchase securities in the TALF’s first monthly round. The decline hinders Fed Chairman Ben S. Bernanke’s efforts to lower borrowing costs and extends a slow start for a program that the Obama administration is using as a cornerstone of plans to revive credit and end the recession. The Fed is struggling to lure investors, such as hedge funds, that are wary of government restrictions or the risk of future intervention. “It is a big disappointment,” said Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut. “There are some folks who have decided they just don’t want to play in any government programs.”

- China’s housing prices will be stagnant through 2010 as government efforts to spur purchases through economic stimulus measures and lower interest rates fail to cut into a glut of homes, said E-House (China) Holdings Ltd, a Shanghai-based real estate broker and consultant. “Prices won’t rise until inventory is cleared,” E-House Chief Financial Officer Li-Lan Cheng said in an interview in New York. “I don’t see such a scenario until sometime in 2010.” China’s economy, the world’s third largest, faces its biggest threat from the real estate sector, Fan Jianping, head of the State Information Center’s economic forecasting department, said March 18. Home prices fell for a third straight month in February, dropping a record 1.2 percent, the National Development and Reform Commission said March 10. Housing prices in China’s top 20 cities probably declined 5 percent in March, Cheng said. He said oversupply was the worst in Beijing and Shanghai while the southern cities of Guangzhou and Shenzhen were “bottoming out.”

- China’s shipbuilding industry may be about to get a bailout -- from its customers. The government may force state-owned shipping groups to buy more vessels as foreign carriers scrap orders, according to Steve Man, an HSBC Holdings Plc analyst in Hong Kong. That risks increasing costs and overcapacity among shipping lines grappling with a collapse in global trade. “They ‘encourage,’ but my thinking is it’s more of a directive,” said Man. “It hurts every player in the industry and creates excess capacity that will take longer to absorb after an upturn.” A collapse in shipping rates led to a worldwide 95 percent decline in new vessel orders in March, according to Clarkson Plc, the world’s largest shipbroker. In response to the drop in demand, China is drawing up plans to aid state-owned China State Shipbuilding Corp. and China Shipbuilding Industry Corp. that will likely force state-owned shipping groups to pick up orders abandoned by overseas lines, driving rates down further, analysts say. China’s shipbuilding industry may be about to get a bailout -- from its customers. The government may force state-owned shipping groups to buy more vessels as foreign carriers scrap orders, according to Steve Man, an HSBC Holdings Plc analyst in Hong Kong. That risks increasing costs and overcapacity among shipping lines grappling with a collapse in global trade. “They ‘encourage,’ but my thinking is it’s more of a directive,” said Man. “It hurts every player in the industry and creates excess capacity that will take longer to absorb after an upturn.” A collapse in shipping rates led to a worldwide 95 percent decline in new vessel orders in March, according to Clarkson Plc, the world’s largest shipbroker. In response to the drop in demand, China is drawing up plans to aid state-owned China State Shipbuilding Corp. and China Shipbuilding Industry Corp. that will likely force state-owned shipping groups to pick up orders abandoned by overseas lines, driving rates down further, analysts say. China’s biggest shipbuilders, who construct more than 70 percent of dry-bulk carriers, haven’t won an order since October, according to Morgan Stanley. The shipyard stimulus may worsen the overcapacity that contributed to the Baltic Dry Index’s biggest decline in more than two decades. Only nine new vessels of any type were ordered worldwide last month, according to data compiled by Clarkson Plc. More cancellations are likely, as yards worldwide hold orders for dry-bulk ships with a combined capacity equal to 69 percent of the existing global fleet. As much as 65 percent of bulk ships due for delivery next year may be axed or delayed, followed by as much as 60 percent in 2011, according to HSBC.

- Bed Bath & Beyond Inc.(BBBY), the largest U.S. home-furnishings retailer, gained 14 percent in late Nasdaq trading after fourth-quarter profit fell less than some analysts estimated. Bed Bath & Beyond climbed $3.58 to $29.09 at 5:57 p.m. after the close of Nasdaq Stock Market composite trading.

- Defense Secretary Robert Gates said the spate of deadly bombings in Baghdad this week may signal an end to al-Qaeda’s attacks in Iraq. “These are spectacular events that are basically al- Qaeda’s last gasp, I hope,” Gates told reporters in Washington today.

- Manhattan office rents fell the most in at least 25 years in the first quarter as financial companies slashed jobs and relinquished space in the U.S. recession. Rents dropped 6 percent from the fourth quarter to $65.01 a square foot, commercial property broker Cushman & Wakefield Inc. said in a report today. The decline is the most in records dating back to 1984, Cushman said, and shows how much the fallout from the September bankruptcy of Lehman Brothers Holdings Inc. hurt the New York property market.

- North Korea warned it will take “strong steps” if the United Nations Security Council censures the communist state over its long-range rocket launch. Pak Tok Hun, the country’s deputy ambassador to the UN, said yesterday his nation had every right to fire a satellite into space and shouldn’t be punished. “Every country has the right, the inalienable right to use the air space peacefully,” Pak told reporters in New York. If the Security Council takes “any kind of steps whatever, we’ll consider this infringes upon the sovereignty of our country and the next option will be ours.”

- Alcoa Inc.(AA) reported a $497 million net loss in the first quarter, the second straight for the largest U.S. aluminum producer, as the global recession reduced demand for the metal used in automobiles and appliances. Chief Executive Officer Klaus Kleinfeld said Alcoa’s efforts to reduce its dividend, workforce and production helped the company cope with a “historic” drop in aluminum prices. Excluding some items, the loss was 59 cents a share, trailing the average estimate of 14 analysts for a loss of 56 cents. “While things are bad, they are not getting a lot worse,” James O’Mealia, chief investment officer of Sunnymeath Asset Management, said in an interview with Bloomberg Television.

Wall Street Journal:

- Cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, according to current and former national-security officials. The spies came from China, Russia and other countries, these officials said, and were believed to be on a mission to navigate the U.S. electrical system and its controls. The intruders haven't sought to damage the power grid or other key infrastructure, but officials warned they could try during a crisis or war. "The Chinese have attempted to map our infrastructure, such as the electrical grid," said a senior intelligence official. "So have the Russians."

- Two environmental groups say they will ask the Canadian government to halt Royal Dutch Shell PLC's planned expansion of production in the oil sands after they claim the energy giant reneged on environmental promises. The groups says Shell agreed to take steps to limit greenhouse-gas emissions from two expansion projects and received government approval based on those pledges, but failed to meet them. The groups plan to ask the federal government and Alberta Energy Resources Conservation Board to revisit permits grants to expand production by the Shell-led Athabasca Oil Sands Project. Shell's Canadian affiliate owns 60% of the project, while Chevron Corp. and Marathon Oil Corp. each own 20%. The two projects being contested -- called Jackpine and the Muskeg River expansion -- would each add 100,000 barrels of daily oil production to existing facilities.

- The Case for Buying a Home Right Now.

- In the current wave of pitchfork populism, it would be easy to assume that the rich are riding out the crisis in relative comfort–with their private jets, bonuses and five-figure commodes–while the rest of us struggle. But consider this stunning statistic: the world’s rich have lost $10 trillion, or a quarter of their wealth, in the global financial crisis, according to Oliver Wyman, a consulting firm. That is about equal to the combined economic output of Japan, Germany and China.

- The Treasury Department plans to extend the Troubled Asset Relief Program to certain eligible life insurers, according to people familiar with the matter. Several life insurers have been burdened lately by capital constraints amid ailing markets. The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift, these people said.

- U.S. companies, after months of watching unsold goods mount in stores and warehouses, are reducing inventories enough to offer hope they can soon ramp up production and give the U.S. economy a needed boost.

- China on Tuesday repeated its call for calm after North Korea's latest test of a multistage rocket, attempting to defuse anger in the U.S. and elsewhere at a time when its own economic interest in the neighboring state is soaring. Since North Korea's test of a rocket similar to a long-range missile on Sunday, Chinese diplomats have refused to criticize Pyongyang and forestalled penalties against it in the U.N. Security Council, where China is a permanent member with veto power.

- Manhattan District Attorney Robert M. Morgenthau said Tuesday that a Chinese company and its manager were indicted on criminal charges for allegedly engaging in illegal financial transactions through U.S. banks to help Iran import a variety of banned materials, including metal alloys that could be used for nuclear weapons and ballistic missiles. At a news conference Tuesday, Mr. Morgenthau announced a 118-count criminal indictment against Li Fangwei, a Chinese citizen, and his company, Limmt Economic and Trade Co., and its various affiliates. The charges include falsifying business records and conspiracy. The falsifying business records counts carry a sentence of up to four years in prison.

- All the buzz about “netbooks”–low-end laptops often powered by Intel’s(INTC) Atom chip–has overshadowed another piece of jargon the Silicon Valley giant helped propagate, low-end desktop systems it calls “nettops.” Taiwan’s Acer Tuesday showed off a new example of such a system, but the news is more positive for rival Nvidia(NVDA) than for Intel.

- Mosaic Co.'s(MOS) fiscal third-quarter net income fell 88% as the fertilizer company was squeezed by rising materials costs and falling sales volumes. The company also warned potash sales would continue to be weak in the fourth quarter, though it did seem more optimistic on phosphates. For the quarter ended Feb. 28, Mosaic reported net income of $58.8 million, or 13 cents share, down from $520.8 million, or $1.17 a share, a year earlier. The latest quarter included an inventory write-down of five cents a share and a derivative loss of five cents a share. Net sales fell 36% to $1.38 billion. Analysts expected per-share earnings of 24 cents on revenue of $1.89 billion, according to a poll by Thomson Reuters. Gross margin plunged to 10% from 34%. The average price for a common phosphate fertilizer during the quarter fell 15%, while the price for a potash version more than doubled. Net sales in the phosphates business dropped 56%, as the segment swung to a loss and sales volume fell by half. In the potash segment, net sales fell 12% and earnings fell 5%. Sales volume fell by 63%.

MarketWatch.com:
- White House ponders: Are some hedge funds too big to fail? Expect regulatory battle over who would pay to unwind hedge funds, buyouts.

- Under pressure from lawmakers and financial institutions, the Securities and Exchange Commission will release a proposal on Wednesday that has a number of different approaches to reinstating the so-called uptick rule, a provision that limits short selling.

CNBC.com:
- If there’s one thing in the market Cramer can’t stand, it’s Ultrashort ETFs. And the worst of the bunch is the SKF, the Ultrashort Financials Proshares(SKF), which Cramer calls “an ETF of mass destruction.” Instruments like the SKF allow you to short a basket of stocks in one fell swoop, and Cramer argues that the SKF in particular is just a tool for day traders and market manipulators who want to put pressure on the banks. (video)

NY Times:

- The inspector general of the government’s financial bailout program said Tuesday it was looking into the $62 billion paid to banks like Goldman Sachs(GS) and Deutsche Bank(DB) to settle trades they had with the American International Group, the giant insurance company that nearly collapsed last fall. The inquiry, which a group of lawmakers had requested, will examine how A.I.G.’s 16 counterparties for its credit default swap portfolio were paid the full value for securities that, at the time, had a market value of about half that amount. The difference between the market value and the par value that was paid out to A.I.G.’s counterparties is about $30 billion, according to the A.I.G. data. Some critics of the A.I.G. rescue saw these payments as a backdoor bailout for banks that held the securities. Without A.I.G as a backstop or other hedges in place, those financial institutions would presumably have had to write down those securities on their books. “What was the benefit of the decision to pay 100 percent of face value to the American taxpayers who provided the bailout funds and how did it support the goal of ensuring the stability of the economic system?”, Mr. Cummings and the other lawmakers said in the letter. So far, the government has pledged more than $180 billion to prop up A.I.G. Mr. Barofsky said Tuesday that his office would examine the extent to which A.I.G. paid counterparties claims’ at 100 percent of face value and whether there was any attempt made to renegotiate the claims to reflect their diminished market value. Of the nearly $30 billion that the government paid for the securities in excess of their market value, two-thirds flowed to foreign institutions like Société Générale of France and Deutsche Bank of Germany.

The Hill:

- Lawmakers are just beginning to consider details of a new systemic regulator to oversee the entire financial system, but the new authority will likely reach into the yet unregulated world of derivatives. The Obama administration and leading lawmakers in Congress, including Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, back a proposal to set up a systemic risk regulator to prevent large financial institutions from toppling the broader system. They also support greater restrictions on derivatives now mostly traded simply between parties rather than on a public market.

LA Times:

- Wine drinkers in France, Italy and across Europe uncorked fewer bottles last year as the global economy slowed dramatically, leaving the United States as the world's largest consumer, an industry group said Tuesday. After years of non-stop growth, global wine consumption contracted by 0.8% last year, according to the International Organization of Vine and Wine's first estimate. That is the first drop since records began in 2004. Falling wine consumption in Europe offset growth in other countries, such as the U.S., which for the first time surpassed Italy in terms of total consumption, the organization said in its annual report on the market. In another shift in the industry, European vineyards accounted for less than half of the world's grape production for the first time, the organization's director general Federico Castellucci said.

FINalternatives:

- Is last year’s most provocative hedge fund launch just another fraud? Sources close to AdultVest Inc., which manages the Priapus Investment Fund, an adult entertainment hedge and private equity fund, say that it is spending investor money on more than just investments, and that what investments there are don’t account for the returns it claims. A former investor says that founder Francis Koenig is looting the fund to pay for fine art, expensive wines, cars, personal trips and alimony. Meanwhile, a former employee tells FINalternatives “there was no capital being generated” during his time at the firm. “There is almost no money left in the fund,” the investor, who said he was privy to some of AdultVest’s financials via a court order, alleges. “Koenig has an American Express black card through the company that he uses on partying, girls and high living. Most money is missing and iPorn.com is not worth what he says it is.”

Forbes.com:

- The Recovery Begins. Home, retail and auto sales point to a turnaround.

Financial Times:
- Businesses must not sink money into high-carbon infrastructure unless they are willing to lose their investments within a few years, the US lead negotiator on climate change has warned. In the Obama administration’s starkest rebuke yet to industry over global warming, Todd Stern, special envoy for climate change at the state department, said “high-carbon goods and services will become untenable” as the world negotiates a new agreement to cut carbon emissions. Investors should take note, he warned, that high emissions must be curbed, which would hurt businesses that failed to embark now on a low-carbon path. “How good will the business judgment of companies that make high-carbon choices now look in five, 10, 20 years, when it becomes clear that heavily polluting infrastructure has become deadly and must be phased out before the end of its useful life?” Companies investing in such goods and services – such as coal-fired power plants and gas-guzzling cars – could start to incur heavy economic penalties for their greenhouse gas output. These could include buying carbon permits under a US cap-and-trade system, for which the administration of President Barack Obama is currently attempting to gather support in Congress. Mr Stern, in an interview with the Financial Times, said a new treaty – which he insisted could be negotiated this year, at a United Nations climate change meeting in Copenhagen in December – must include developing countries. Under the 1997 Kyoto protocol, emerging economies such as China and India were spared the obligation to reduce their greenhouse gas emissions. But their output has grown rapidly since, with China overtaking the US as the world’s biggest emitter. “Exactly what form those [commitments] take is unclear, but there will need to be substantial action on the part of leading developing countries if we are going to have any chance of getting in the vicinity of what the science says we need to do,” he said.

- The International Monetary Fund is likely to raise its estimate of total credit losses on US assets from $2,200bn to about $2,800bn when it releases its Global Financial Stability report later this month. The new estimate, while up significantly from January, will almost certainly be lower than a $3,100bn (€2,350bn, £2,111bn) figure circulating on Tuesday, which contributed to pressure on US bank stocks. The IMF is also expected to release for the first time an estimate of total losses on European assets, which is likely to exceed $1,000bn. The fund is likely to put total losses globally at slightly above $4,000bn, including some additional losses on Asian assets. Experts think that up to three-quarters of these losses will fall on banks globally, with the balance hitting other financial institutions.

TimesOnline:

- For the first time in nearly 30 years, there are more people selling gold jewelry as scrap than buying new items. The high price of gold combined with the economic downturn has encouraged people to raise extra cash by selling everything from family heirlooms to tooth fillings. GFMS, the leading precious metals analyst, said yesterday that an estimated 500 tons of gold had been sold as scrap during the first three months of this year. Demand for new jewelry had nearly halved to 420 tons, the first time since 1980 that more scrap was being sold than customers were buying new rings and bracelets.

Economic Daily News:

- AU Optronics Corp. and Chi Mei Optoelectronics Corp. have raised their factory usage to 80%, citing executives. AU Optronics CEO Chen Lai-Juh said in March that its first-quarter factory use may exceed the 50% it expected in January. Chi Mei said at an investors’ conference in February that its usage would rise to 40% in the first quarter from 35% in the fourth quarter. AU and Chi Mei are Taiwan’s two biggest makers of liquid-crystal displays.

Late Buy/Sell Recommendations
Citigroup:

- Rated (ABX) Buy, target $40.

- Rated (CSC) Sell, target $30.

Night Trading
Asian Indices are -1.75% to -.50% on average.
S&P 500 futures -.87%.
NASDAQ 100 futures -.53%.

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- (JOSB)/1.51

Economic Releases

10:00 am EST

- Wholesale Inventories are estimated to fall .7% in February versus a .9% decline in January.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +2,844,000 barrel build the prior week. Gasoline supplies are expected to fall by -1,400,000 barrels versus a +2,225,000 barrel increase the prior week. Distillate inventories are estimated to fall by -600,000 barrels versus a +221,000 barrel increase the prior week. Finally, Refinery Utilization is expected unch. versus a -.28% decline the prior week.

2:00 pm EST

- Minutes of March 17-18 FOMC Meeting.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Fisher speaking, weekly MBA mortgage applications report, (TROW) shareholders meeting, (TIBX) shareholders meeting, (UTX) shareholders meeting and the (WDR) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and financial stocks in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Sharply Lower, Weighed Down by Education, Gaming, REIT, Semi and Homebuilding Shares

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In Play

Stocks Lower into Final Hour on Profit-taking, More Shorting

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Retail longs and Technology longs. I added (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is below average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising .22% and is very high at 41.02. The ISE Sentiment Index is slightly below average at 131.0 and the total put/call is about average at .89. Finally, the NYSE Arms has been running above average most of the day, hitting 2.52 at its intraday peak, and is currently .84. The Euro Financial Sector Credit Default Swap Index is dropping .09% today to 156.33 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 .82% to 191.97 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is falling 1.3% to 96 basis points. The TED spread is now down 367 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is up .42% to 59.75 basis points. The Libor-OIS spread is falling .11% to 94 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 10 basis points to 1.36%, which is down 128 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 .19%, which is unch. today. Healthcare-related stocks are relatively strong today, with HMO and Medical Equipment shares actually higher on the day. The US sovereign debt credit default swap index is plunging 12.3% to 57.0 basis points, which is a multi-month low and a big positive. As well, weekly retail sales fell .8% this week, which is up from a 1.1% decline the prior week and up from a 2.3% decline the week of Feb. 3^rd. Weekly retail sales are now at levels last seen during the week of Dec. 9, which is a positive. On the negative side, investor angst isn’t as high as I would like to see given today’s losses. As well, (IYR) is under meaningful pressure and trades “heavy.” This pullback in the broad market looks like it could go a bit further before another move higher commences. Nikkei futures indicate a -37.0 open in Japan and DAX futures indicate a -22.0 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and lower energy prices.

Today's Headlines

Bloomberg:

- Nanya Technology Corp., Taiwan’s second-biggest maker of computer-memory chips, plans to raise prices of the semiconductors by 15% to 20% during the first half of April. Nanya plans to raise chip prices by at least 10% for the first half of April because of rising demand, the United Evening News reported.

- Archer Daniels Midland Co.(ADM), the world’s largest grain processor, declined in New York trading after a Citigroup Inc. analyst said weaker demand for agricultural products is hurting results in the oilseeds unit. “Slowing agricultural demand and overcapacity are negatively impacting volumes and margins in ADM’s oilseeds and agricultural-services businesses,” David Driscoll, a Citigroup analyst, said in a report today. Driscoll lowered his rating on the shares to “sell” from “hold.”

- Crude oil fell for a third day on speculation that a report tomorrow will show U.S. supplies increased as the recession curbs fuel demand. Stockpiles rose 1.5 million barrels last week, according to the median of 11 estimates by analysts in a Bloomberg News survey before the Energy Department report. “We still haven’t seen any evidence that the excess supply is being absorbed.” Crude-oil inventories climbed 2.84 million barrels to 359.4 million in the week ended March 27, the highest since July 1993, the Energy Department reported on April 1. It was the 23rd gain in 27 weeks. The increase left supplies 13 percent higher than the five-year average. The International Energy Agency, the Organization of Petroleum Exporting Countries and the Energy Department cut their 2009 forecast for oil demand in March. The IEA will probably lower its global demand forecast this month, given slowing world economic growth, Executive Director Nobuo Tanaka said April 2. The Paris-based agency is scheduled to release its next report on April 10.

- Members of the Organization of Petroleum Exporting Countries have split with developing nations over more stringent cuts in the burning of fossil fuels, fearing their economies will suffer from shrinking demand for oil. Most developing countries are calling for wealthier nations to reduce carbon-dioxide emissions 40 percent to 45 percent by 2020 at climate talks in Bonn, Chinese negotiator Su Wei said. Oil producers are concerned the cuts will shrink energy exports. “Whatever policies will be adopted will add to the uncertainties for the demand for oil,” said Mohammad Al Sabban, an adviser to Saudi Arabia’s Ministry for Petroleum and Mineral Resources, in an interview. “We share the concern for climate change but at the same time we don’t want to be a victim.”

- AMR Corp.’s American Airlines(AMR) and UAL Corp.’s United Airlines(UAUA) pared declines in traffic in March, suggesting that the industry’s slump in travel may be easing.

- European Central Bank council member George Provopoulos suggested the bank may cut its benchmark interest rate below 1 percent if the economy worsens and could also buy corporate debt to stimulate lending. “I do not see 1 percent as a threshold for the ECB benchmark rate,” Provopoulos, who heads the Greek central bank, said in a telephone interview in Athens late yesterday. “I do not exclude that the ECB could go down further from this level if the economic environment deteriorates further.”

- Colorado State University’s Atlantic hurricane forecast, the most-watched annual prediction, was lowered today to 12 named storms for the 2009 season, with six developing into hurricanes. Researchers William Gray and Philip Klotzbach cut the number from a preliminary estimate of 14 in December. Two of the hurricanes should reach major strength, meaning winds of 111 mph (178 kph) or more on the Saffir-Simpson Scale, they said today.

- Bayerische Motoren Werke AG, the world’s biggest maker of luxury vehicles, said March deliveries fell 17 percent, led by a drop in the U.S. and falling demand at the Mini small-car brand. Sales declined to 126,375 cars and sport-utility vehicles, Munich-based BMW said today in a statement. First-quarter deliveries fell 21 percent from a year earlier to 277,264. Shrinking European and U.S. car markets have prompted BMW and second-ranked competitor Daimler AG to scale back production, and the companies said last month that they’ll widen cooperation on parts to reduce costs. Daimler said today that its Mercedes Benz Cars division’s sales dropped 16 percent in March, with the U.S. also leading the decline.

Wall Street Journal:

- U.S. Energy Secretary Steven Chu raised the prospect Tuesday of getting the U.S. away from coal and nuclear power by the next century by relying more on renewable energy - and then backed away from the politically touchy position. "What I said is perhaps at the end of this century we could get renewables in a plane and energy storage and transmission that we can transition away from these others - but I don't see this happening any time soon," Chu told reporters after speaking at the Energy Information Administration's annual conference.

- U.S. President Barack Obama made a surprise visit to Baghdad, saying such a trip was critical because progress in Iraq, which has been rocked by a new round of bombings, lies "in political solutions." Meeting with Gen. Raymond Odierno and about 600 U.S. troops at Camp Victory, outside Baghdad, on Tuesday, Mr. Obama said that "we've made significant political progress" in Iraq. But, he added, "with the national elections coming up, many of the unresolved issues may be brought to a head."

- A federal judge set aside the conviction of former Alaska Sen. Ted Stevens and appointed a special prosecutor to investigate possible criminal-contempt charges against federal prosecutors who the judge said repeatedly withheld evidence from defense attorneys. U.S. District Court Judge Emmet G. Sullivan said, "In 25 years on the bench I have never seen anything approach the mishandling and misconduct I have seen in this case." Attorney General Eric Holder last week unexpectedly announced that the Justice Department wanted to drop charges against the 85-year-old Mr. Stevens, citing multiple missteps by prosecutors in failing to turn over key evidence to the defense. Mr. Stevens was convicted by a federal jury last October, just eight days before Election Day. The Republican lost his re-election bid by fewer than 4,000 votes, handing Democrats a crucial seat in the Senate.

CNBC:

- The US stock-market is about halfway or one-third into its rebound, though not necessarily at the start of a “secular bull market,” Barton Biggs, the managing partner at Traxis Partners LLC, said. The rebound in stocks might resemble the recovery seen in 1938, Biggs said. The Dow Jones Industrial Average rallied 28% that year. (video)

MarketWatch:
- Believing that the first quarter marked a "nadir" for software stock fundamentals, RBC Capital Markets upgraded several major players in the sector to buy ratings on Tuesday.

NY Daily News

- The Manhattan district attorney's office has smashed a sinister plot to smuggle nuclear weapons materials to Iran through unwitting New York banks, the Daily News has learned. fficials plan to unseal a 118-count indictment Tuesday accusing a Chinese national of setting up a handful of fake companies to hide that he was selling millions of dollars in potential nuclear materials to Tehran. This case will cut off a major source of supply to Iran and it shows how they are going ahead full steam to get a nuclear bomb. Long-range missiles they pretty much have already," a law enforcement source close to the case said.

Boston Globe:

- Citigroup Inc.'s(C) new board chairman, Richard Parsons, said financial institutions are being targeted for creating the nation's financial crisis, but they aren't the only ones responsible. "Everybody participated in pumping up this balloon. Now the balloon has deflated," he said Monday. "Everybody, in reality, has some part of the blame. But it's much more in the culture to find a villain and vilify the villain." Besides banks, there was reduced regulatory oversight, loans to unqualified borrowers were encouraged and people took out mortgages or home-equity loans they couldn't afford.

LA Times:

- Eight months after their surprising embrace of offshore oil drilling, Santa Barbara County supervisors are set today to resume their decades-old opposition to the practice. The board's majority has shifted from Republican to Democratic, the Obama administration has taken over in Washington, and the price of crude oil has plunged from nearly $150 a barrel last summer to about $52 a barrel on Monday. With an Interior Department hearing on offshore drilling planned next week in San Francisco, the supervisors are to consider a resolution urging a ban on new offshore drilling. "I feel strongly that we've been a national leader in conservation and alternative energy," Farr said. "That's the direction we need to go. We can't drill our way out of this." As gas prices soared toward $5 a gallon last year, Congress and the Bush administration lifted long-standing bans on expanding offshore drilling. Two months ago, Interior Secretary Ken Salazar slowed the process for granting new offshore leases, criticizing the previous administration's "headlong rush." But many Santa Barbara County residents have no problem with tapping into undersea resources, contending that evolving technology has minimized the risk of catastrophic spills. "It's irresponsible not to develop offshore drilling and production, with a serious eye to making certain it's safe -- which it can be," said Joni Gray, a supervisor who represents the Santa Maria and Lompoc areas. To some, the conflict mirrors a county split between its conservative, agricultural north and its liberal, more affluent south. "It's two different worlds," Gray said. "A lot of people in the north came here because their parents or grandparents worked in the oil industry. That was a good job. If you weren't fortunate enough to have a master's or a Ph.D. or a large inheritance, it was a way of working yourself out of the fields or washing dishes.

- The chief executive of Goldman Sachs Group Inc. on Tuesday called for new standards on how Wall Street executives are compensated and new regulation of large hedge funds and private equity funds. Lloyd Blankfein, who received compensation valued at nearly $43 million last year, said lessons from the financial crisis include the need to "apply basic standards to how we compensate people in our industry." He suggested a handful of guidelines, including only junior employees being paid mostly in cash and that the percentage of pay awarded as company stock increase significantly along with a worker's total compensation. Public anger over the financial distress and taxpayer bailout of the banking industry spilled over to Blankfein's appearance. As he began his address to the gathering in a hotel ballroom, two women appeared on the stage with a large purple sign saying, "We want our $$$$$ back." Blankfein asked them to leave and they did so. But the women later charged onto the stage and podium yelling protests against the bailout. While criticizing their demeanor, Blankfein acknowledged the legitimacy of the widespread anger they expressed.

Politico:

- President Barack Obama, after a lightning-quick start for his agenda on Capitol Hill, is bracing for a much slower pace and big changes in his proposals as early urgency and excitement give way to the more languid rhythms that are the norm for Congress. Officials are most pessimistic about his energy and global warming plan, with many aides doubting he will win passage of a cap-and-trade emissions reduction system, which is strongly opposed by business and Republicans. The White House is most optimistic for passage this year of his plans to overhaul the nation’s financial regulations, and aides also see a strong chance that a gradual version of his health care overhaul will get through Congress this fall.

Reuters:
- OPEC can live with oil prices of $50-$60 a barrel for the rest of 2009, a source close to the organization's Angolan presidency said on Tuesday. The comments fit with an emerging consensus in OPEC that it will accept lower prices than it would like to help nurse the global economy back to health and mark a retreat from OPEC President Jose Botelho de Vasconcelos' remarks in March that oil could reach $75 a barrel this year. hey also imply Angola is unlikely to argue for an output cut when the group next meets on May 28. The current oil price is not ideal but we can live with it. Taking into account the current economic crisis, OPEC will be comfortable with a price of $50 to $60 per barrel until the end of the year," the source told Reuters. We don't expect prices to reach $75 per barrel this year under the current economic climate." OPEC Secretary General Abdullah al-Badri said in Paris last week the group might be able to live with oil around $50 for the rest of this year.

- The U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating stock market reaction, a source familiar with Treasury's discussions said on Tuesday. The Treasury is still talking about how results of the regulatory stress tests on the 19 largest U.S. banks will be released, and may disclose them as summary results that are not institution-specific, the source said.

- General Motors Corp is in "intense" and "earnest" preparations for a possible bankruptcy filing, a source familiar with the company's plans told Reuters on Tuesday. A plan to split the corporation into a "new" company made up of the most successful units, and an "old" one of its less-profitable units, is gaining momentum and is seen as the most sensible configuration, said another source familiar with the talks. If the plan goes through, the new GM is expected to assume some previous creditor debt from bankruptcy proceedings, such as secured debt, said the second source, adding that GM bondholders are likely to lose substantial value in bankruptcy.

Financial Times:
- Hedge funds wanting loans from the Federal Reserve to buy securities backed by consumer loans – a key plank in the government’s efforts to revive the financial system – are seeking ways to circumvent restrictions on hiring skilled foreign workers to which they will be subject if they borrow government money. Authorization for the Talf is granted through the US’s recent stimulus bill. Inserted in an effort to boost jobs for American employees, the stimulus bill imposes restrictions on recipients of funds on the number of foreign workers that can be employed using H1B visas. These restrictions also apply to investors borrowing money from the Talf. Lawyers are working on setting up legal entities – a type of special purpose vehicle (SPV) – in which hedge funds can take stakes. These SPVs can then borrow money from the Fed. If investor stakes in the SPVs are small enough, then the limits on the number of workers employed under H1B visas might be avoided. Lawyers said they are still unsure whether such SPVs will actually avoid H1B visa restrictions. Last week, the US Citizenship and Immigration Services, part of the Department of Homeland Securities, said the restriction ”applies to the SPV and to any entity that owns or controls 25 per cent or more of the total equity of the SPV”. Whether the term ”controls” includes, for example, having some voting stakes in the entity is unclear, lawyers said.

Shanghai Securities News:

- Shanghai’s residential property sales fell 5% last week form the previous week, citing data from real estate agency E-House Holdings Ltd. The average price of Shanghai homes declined 3.8% last week to $1,932 per square meter from the March 22-29 period.

Efe:
- Repsol YPF SA, Eni SpA and Nippon Oil Corp have submitted bids to help develop the Nasiriyah oil field in Iraq, citing Iraqi officials. The field is one of the world’s largest, with estimated reserves of 4 billion barrels.

Bear Radar

Style Underperformer:
Mid-cap Growth (-2.94%)

Sector Underperformers:
Education (-7.16%), Coal (-5.70%) and REITs (-5.69%)

Stocks Falling on Unusual Volume:
NIHD, GLW, IOC, RIMM, BLUD, ISCA, ABAX, APOG, CSTR, DBRN, AFAM, APOL, PSYS, VTR, BWA, TGP and WMS

Stocks With Unusual Put Option Activity:
1) TXT 2) BBBY 3) GFI 4) WYNN 5) EMR