Thursday Watch

Late-Night Headlines
Bloomberg:

- The U.S. economy may grow as much as 6 percent this year, helped by sales of consumer durables and increases in inventories, according to Deutsche Bank AG’s chief U.S. economist. The estimate is 50 percent higher than the bank’s 4 percent forecast last month and more than double the 2.60 percent median forecast for 2010 in a Bloomberg survey of 57 economists and analysts. “We feel that unemployment has peaked,” said Bankim Chadha, Deutsche Bank’s chief U.S. equity strategist in New York. He echoed LaVorgna’s outlook, suggesting unemployment may fall to as little as 8.5 percent by the end of the year. The U.S. jobless rate held at 10 percent in December for a second month, the Labor Department reported on Jan. 8, after touching a 26-year high of 10.1 percent in October.

- Google Inc.’s(GOOG) threat to pull out of China is the most visible reflection of U.S. companies’ growing disillusionment with the country nine years after it joined the World Trade Organization, business groups said. Washington trade organizations representing companies such as Microsoft Corp., Boeing Co., Intel Corp. and Cigna Corp., which all backed China’s entry into the WTO and fought off legislation to punish Chinese imports, say China is increasingly discriminating against them on government contracts and through unfair subsidies. “There are a growing number of bilateral problems,” William Reinsch, president of the National Foreign Trade Council, which represents companies including Boeing and Cigna, said in an interview yesterday. “There is a lot of frustration on the part of companies, and the Chinese brought it on themselves.”

- China's exports of oil products including gasoline and diesel fuel in December exceeded imports for the first time ever, squeezing Asian refiners hoping to sell to the world's second-largest fuel consumer. China's exports of refined products in December outpaced imports, according to preliminary data from the General Administration of Customs on Jan. 10. "If you're a Japanese fellow looking to export to China, you'd sure prefer to see them as big importers and you'd sure prefer to see them not exporting at all," said John Vautrain, a senior vice president at consultants Purvin & Gertz Inc. in Singapore. "The fact that they can export so much shows that they are a bit overbuilt" in terms of refinery capacity.

- LaBranche & Co.(LAB) agreed to sell its business that facilitates trades at the New York Stock Exchange for $25 million to Barclays Plc, exiting a unit that goes back to 1901 and shrinking the number of market-making firms to four.

- Hedge-fund managers that use computers to predict trends in futures prices, including Man Group Plc and John W. Henry & Co., posted the biggest losses in more than two decades in 2009 because they missed shifts in equity, commodity and bond markets. Managed-futures funds fell an average of 4.7 percent last year, according to an index of 50 top funds compiled by BarclayHedge Ltd. The decline, which compared with a gain of 13.5 percent in 2008, was the first in 15 years and the largest since BarclayHedge began tracking returns in 1987.

Wall Street Journal:

- Cries from victims entombed beneath concrete debris pierced the air of seemingly every street in this crowded capital Wednesday, where shocked residents carried the injured and the dead a day after the nation was hit by a quake that some estimate has killed more than 100,000 people.

- President Barack Obama plans Thursday to propose taxing large banks based on their exposure to risk as a way to recover taxpayer losses from the 2008 bailout of the financial sector, people familiar with the matter said. The plan marks the latest in a slew of proposed fees, penalties and constraints the White House envisions slapping on Wall Street during the clean-up of the financial crisis. If approved by Congress, the new tax—which the White House calls a "financial crisis responsibility fee "—would force more than 25 banks to collectively pay the federal government roughly $100 billion over 10 years. The numbers could change as the final tally of losses from the $700 billion Troubled Asset Relief Program is calculated.
- Don't Like the Numbers? Change'Em. If a CEO issued the kind of distorted figures put out by politicians and scientists, he'd wind up in prison. Politicians and scientists who don't like what their data show lately have simply taken to changing the numbers. They believe that their end—socialism, global climate regulation, health-care legislation, repudiating debt commitments, la gloire française—justifies throwing out even minimum standards of accuracy. It appears that no numbers are immune: not GDP, not inflation, not budget, not job or cost estimates, and certainly not temperature. A CEO or CFO issuing such massaged numbers would land in jail. The late economist Paul Samuelson called the national income accounts that measure real GDP and inflation "one of the greatest achievements of the twentieth century." Yet politicians from Europe to South America are now clamoring for alternatives that make them look better.

- Comparing Wall Street titans to shady car salesmen, a committee investigating the financial crisis grilled the nation's top bankers Wednesday in the latest example of Washington's smoldering anger at an industry many there feel hasn't atoned for its role in the slump. "It sounds to me a little bit like selling a car with faulty brakes, and then buying an insurance policy on the buyer of those cars," said former California state Treasurer Phil Angelides, chairman of the Financial Crisis Inquiry Commission, while questioning the chief executive of Goldman Sachs Group Inc.(GS).

- Americans learned last year that President Obama discards campaign promises like most people discard used Kleenex. Among the pledges he cast aside were reducing the deficit, reining in federal spending, not allowing lobbyists to work in his administration, increasing taxes only on those who make more than $250,000, and opposing "government-run health care" because it is "extreme." This year, Mr. Obama is picking up where he left off.

MarketWatch.com:

- Price cuts spurred by increased demand and a need to move products off the shelves helped drive a gain in PC shipments around the world, and led to a record for shipments in the U.S. during the fourth quarter of 2009, according to technology research firm IDC. The latest figures from IDC said that total PC shipments in the U.S. reached 20.7 million during the fourth quarter, a 24% increase over the same period in 2008. Apple shipped 1.52 million of its Macs during the quarter, a 31% annual increase. David Daoud, a research manager with IDC, said it was no mistake what was behind the gains. "Once again, the consumer market overcame the weak commercial sector to save the quarter," Daoud said. "The vendors responded with new low price points to stimulate demand and face competition." Worldwide, total PC shipments climbed 15.2% to 85.8 million units. H-P held onto the No. 1 position with almost 18 million shipments and a gain of more than 23% from 2008's fourth quarter.

CNBC.com:
- The worst of the residential housing market is over, Equity Group Investment Chairman Sam Zell told CNBC on Wednesday, but fraud was a major cause. "I think we've seen the bottom in housing and we have passed through the worst issues," Zell said. "There are still some rough spots for sure, like foreclosures but I think we will see a housing recovery through 2010." Zell also said the commercial real estate market was different than the residential by the fact that commercials' problems are supply and demand—and that the residential market was over expanded. He also said that he saw five years of no new development in commercial real estate and that the non-institutional commercial market will come apart in 2010.

- Intel(INTC) On Tech's Earnings Deck.

- The United States must soon raise taxes or cut government spending to curb its debt, and failure to act will risk a crippling dollar crisis as investor confidence ebbs, a panel of experts said on Wednesday. President Barack Obama's administration will present his budget for fiscal 2011 early next month amid intense pressure to live up to election campaign promises not to raise taxes on middle class Americans, while confronting a record deficit.

NY Post:

- TV funnyman Jay Leno is "furious" with how NBC has treated him and Conan O'Brien and is reportedly considering walking away from the network. A day after O'Brien threatened to walk away from NBC, Leno is considering doing the same. "They have put Jay in a terrible position. It looks like he is the reason that Conan is now without a job. Jay is a great guy and it's not fair that due to NBC's stupidity he looks like the bad guy," a TV insider told the celebrity blog PopEater today.

Denver Post:

- How do you persuade deficit-wary (and weary) Americans to support still more federal spending to boost the economy? If you're the president, you trumpet spending on "clean" technology and then make claims that require your audience to suspend their critical faculties.

zerohedge:

- The following are the items demanded by Edolphus Towns and the House Committee on Oversight and Government Reform from the Federal Reserve. We, for one, can not wait to see what ends up being dug up, seeing how the New York Fed has blatantly "forgotten" about our FOIA request for release of precisely the same data. All documents in the possession, custody, or control of the Federal Reserve Bank of New York, relating to AIG credit default swap counterparty payments, the decision to compensate AIGs credit default swap counterparties at par, and public disclosure of the counterparty payments, including: Emails, phone logs, and meeting notes of the following people: Timothy Geithner, Stephen Friedman, Thomas Baxter, and Sarah Dahlgren; Term sheets, including drafts, relating to AIG's payments to its CDS counterparties; and Emails, phone logs, and meeting notes relating to public disclosure of AIG's payments to its CDS counterparties, including disclosure to the SEC. We are particularly happy that Goldman(GS) director Stephen Friedman has been implicated in this subpoena: perhaps we will finally be able to get some definitive evidence of wrongdoing by the Fixed Income sales and trading monopolist, in addition to the metric tons of circumstantial evidence of ongoing wrongdoing already presented.

CNNMoney.com:

- The U.S. government posted a deficit of $91.9 billion in December, nearly double the shortfall of a year earlier and marking the government's 15th straight month in the red, the Treasury Department reported Wednesday. The shortfall brings the total deficit for the first quarter of fiscal year 2010 to $388.5 billion, up from $332 billion during the same period last year.

Business Insider:

- How The New "Reform" Bill Is Really The Mother Of All Blank-Check Bailouts by Robert Reich.

- Maybe the election of Scott Brown in the Massachusetts special election won't derail healthcare. At least not if state pols can do something about it. Today the chatter is that local officials may drag their feet on seating him so that Washington Democrats have time to pass healthcare reform.

- Pity NBC's local news stations. Their 11 p.m. newscasts lost 19.7 percent of their viewers between November 2009 and November 2008, according to an analysis of Nielsen data by the Pew Research Center's Project of Excellence in Journalism.

Business Week:

- Sergey Brin and Larry Page are finally living up to their motto: “Don’t Be Evil.” It turns out that Google Inc.’s(GOOG) founders have a conscience even after helping China censor cyberspace. Yesterday, the most popular Internet search engine said it may shut its Chinese Web site and offices. It’s about time, guys. It was always as distasteful as it was incongruous for the banner-waver of the information economy to help China keep its 1.3 billion people in the dark. In a January 2006 column, for example, I suggested we should be honest and refer to it as CommunistGoogle.com. Better late than never, though. Such a high-level rebuke is important because it shines a spotlight on how much energy governments expend on censoring the Internet. This conversation is about to get more traction than ever. It’s one that Asian officials from Beijing to Jakarta very much need to have for the good of their economies.

- Apple Inc.’s(AAPL) latest iPhone will probably be available as early as June, include a more advanced camera, and may feature a touch-sensitive casing, Goldman Sachs Group Inc. analyst Robert Chen said in an interview, without identifying who gave him the information. “Apple’s going to put a lot of innovation, not just on the hardware, but also on the software of the new iPhone,” said Taipei-based Chen, a member of Asia’s top-ranked technology hardware research team. The handset will feature a new plastic casing similar to that used for Apple’s touch-panel Magic Mouse released last year, he said.

Politico:

- After an unusual day-long negotiating session, President Barack Obama and top Democratic congressional leaders said late Wednesday that they were making “significant progress” towards reconciling the House and Senate health care reform bills. Obama, House Speaker Nancy Pelosi and Majority Leader Harry Reid issued a statement at the close of more than eight hours of White House talks – by far the most significant, high-level negotiations undertaken during the yearlong push for health care reform. “Today we made significant progress in bridging the remaining gaps between the two health insurance reform bills,” according to the statement.

Rasmussen Reports:

- Thirty-two percent (32%) of U.S. voters say the country is heading in the right direction, according to the latest Rasmussen Reports national telephone survey. The latest finding has held steady from last week after two months of decline that culminated two weeks ago in a finding of 29%, the lowest since February 2009. The majority of voters (62%) continue to believe the nation is heading down the wrong track.

Real Clear Politics:

- Ultimately what we're left with is a GOP that has never managed to get within seven points of a Senate seat in Massachusetts since 1972. And that seven-point defeat came while running a very, very moderate Governor who had won re-election a two years earlier with over 70% of the vote against a Senator who had never been very much beloved by the state. Here, we have a virtually unknown state Senator who is promising to vote against the Democrats' top legislative priority taking on a sitting Attorney General. Probably the closest analogue would be Kerry's 1984 race, when he was a sitting Lieutenant Governor facing off against a conservative millionaire. Kerry won by ten points in the midst of the Reagan landslide. And let's remember, a high-quality candidate in Mississippi (a state about as Republican as Massachusetts is Democratic), running in the best Democratic year in decades lost by ten points. So if Scott Brown makes this a low-single digit race it will be unprecedented - and it will be a big deal.

Search Engine Journal:

- Here we go, latest search market statistics released by Nielsen indicates that Google(GOOG) again rules the search market in December. Google gets 67.3% of all the 9.9 billion searches made last December. That’s actually 6.7 billion shares conducted on Google’s search engine. Following Google far behind are of course Yahoo and Bing getting 14.4% or more than 1.4 billion searches and 9.9% or 986 million searches, respectively. Other searches were made at Ask.com, My Web Search and Comcast. Looking back at Google’s November search market share would show that December’s search number was a big leap from 65.4%. Interestingly, both Yahoo and Bing suffered from a loss in searches from November to December. Obviously some, if not all of these searches went to Google. What’s even more interesting was Bing’s significant drop in search market share from November’s 10.7%.

USAToday:

- The country's top product safety regulator warned parents and caretakers Wednesday to take cheap metal jewelry away from children out of concern they could be exposed to toxic heavy metals such as lead and cadmium. Writing in a blog to be posted Wednesday evening, the chairman of the Consumer Product Safety Commission noted that children who chew, suck on or swallow a bracelet charm or necklace may be endangering their health. "I have a message for parents, grandparents and caregivers: Do not allow young children to be given or to play with cheap metal jewelry, especially when they are unsupervised," wrote Inez Tenenbaum, the chairman of the Consumer Product Safety Commission. "We have proof that lead in children's jewelry is dangerous and was pervasive in the marketplace. To prevent young children from possibly being exposed to lead, cadmium or any other hazardous heavy metal, take the jewelry away." In making the recommendation, Tenenbaum cited an investigation by The Associated Press which reported high cadmium levels in items including bracelet charms from Walmart and Claire's stores. Lab tests conducted for the AP on 103 pieces of low-priced children's jewelry, nearly all exported from China, found 12 items with cadmium content above 10% of the total weight. Several of those shed very high amounts of the metal when analyzed for how much of the toxin a child might be exposed to after swallowing the item. Like lead, cadmium can hinder brain development in young children, according to recent research. It also causes cancer.

Reuters:

- A law firm representing a U.S. software maker that is suing China for code theft said it has been targeted by Chinese hackers, a day after Google Inc. (GOOG) threatened to withdraw from the country following similar attacks.

- California's main debt rating was cut on Wednesday by Standard & Poor's, which said the government of the most populous U.S. state could nearly run out of cash in March -- and another rating cut might follow.

- Republican lawmakers slammed Treasury Secretary Timothy Geithner on Wednesday over multi-million dollar pay packages for executives at mortgage-finance firms Fannie Mae (FNM) and Freddie Mac (FRE), which the government took over during the financial crisis. "Awarding millions of dollars in bonuses on the taxpayers' dime is unconscionable," Rep. Jeb Hensarling wrote Geithner in a letter signed by 70 Republicans. Hensarling, a persistent critic of the two government-supported mortgage finance agencies, also said he was troubled at the Treasury's announcement that it would allow unlimited losses at the two firms. Their losses had been capped earlier at $200 billion. Treasury announced both the pay packages and the lifting of the loss cap on Dec. 24. "It is inconceivable to me that, after these institutions have been given access to unlimited taxpayer funds to cover losses they have incurred as a result of their reckless behavior, their top executives would each be awarded multi-million dollar compensation packages," Bachus said in a statement. Bachus also signed Hensarling's letter.

Financial Times:

- Just hours before Google(GOOG) announced late on Tuesday that China-based hackers had attacked its systems last month, China’s cyberwarriors were at work – this time defacing Iranian websites in retaliation for a hacker attack on the pages of a Chinese search engine. If the idea of search engines as battlegrounds in a cyber-war is surprising, the motivations and prowess of Chinese hackers are well established. Unlike most of their counterparts in other countries known for malicious computer activity, especially eastern Europe, Chinese hackers are known for patriotism. They have often gone after targets in Taiwan and, during diplomatic flare-ups, Japan and other neighbors. Commercial concerns for rank-and-file criminals have tended to come later, and some hacking collectives have split up over the issue. The more critical questions are how much of the patriotic activity is directed or encouraged by the government, and how much officials are behind what appear to be commercial intrusions and thefts.

Evening Recommendations

Citigroup:

- Upgraded (PPG) to Buy, Added to Top Picks Live list, target $71.

- A Return to Double-Digit Growth Rates for US 'Net Advertising, Retail & Travel - 'Net Advertising forecast to grow approx 14% in '10 to $27B(11% of total advertising). Online retail forecast to grow 15% to $154B(over 4% of total retail/7% of addressable retail). And Online Travel forecast to grow 11% to $100B(63% of Total Travel). We see the Internet sector being materially impacted by three broad new growth drivers: 1) SmartPhones and mobile internet usage, especially now that SmartPhones have eclipsed 20% of the mobile installed base 2) the migration of TV ad budgets online, especially now that internet video usage has become well established and 3) MicroTransApptions, which the dramatic growth in social gaming/digital goods businesses are highlighting. Top '10 Stocks Based on Fundamental Outlooks - (GOOG), (AMZN), (AKAM), (NFLX), (PCLN) & (YHOO), based on revenue growth and operating margin trends, core market share gains and product innovation/new revenue streams. Weakest stocks based on '10 fundamental outlooks are (AOL) and (EBAY). Top '10 Stocks Based on Economic/Other Factors - (GOOG) (as cyclical recovery beneficiary with material EPS leverage and international exposure), (AKAM) as cyclical beneficiary, with material EPS leverage and potential for a strategic catalyst), and (AMZN) with what appears to be the sector's best potential for upwards EPS revisions. Top '10 Stocks Based on Valuation - (IACI), (YHOO) and (AKAM). Our Top Large Cap Buys - (GOOG), (AKAM), (PCLN) and (AMZN).

Night Trading
Asian indices are +.50% to +1.25% on avg.

Asia Ex-Japan Inv Grade CDS Index 89.50 -1.5 basis points.
S&P 500 futures +.23%.
NASDAQ 100 futures +.16%.

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- (INTC)/.30

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Economic Releases

8:30 am EST

- The Import Price Index for December is estimated unch. versus a +1.7% gain in November.

- Advance Retail Sales for December are estimated to rise +.5% versus a +1.3% gain in November.

- Retail Sales Ex Autos for December are estimated to rise +.3% versus a +1.2% gain in November.

- Initial Jobless Claims for last week are estimated to rise to 437K versus 434K the prior week.

- Continuing Claims are estimated to fall to 4750K versus 4802K prior.

10:00 am EST

- Business Inventories for November are estimated to rise +.3% versus a +.2% gain in October.

Upcoming Splits

- None of note

Other Potential Market Movers
- The Treasury's 30-year auction, ECB rate decision, weekly EIA natural gas inventories report, Needham Growth Conference and the JPMorgan Healthcare Conference could also impact trading today.

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

Stocks Finish at Session Highs, Boosted by Airline, Gaming, REIT, Bank, Hospital, Networking, Disk Drive, Computer and Oil Service Shares

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Stocks Surging into Final Hour on Short-Covering, Less Financial Sector Pessimism, Diminishing Economic Fear, Lower Energy Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Financial longs, Biotech longs, Medical longs and Technology longs. I covered all my (IWM)/(QQQQ) hedges, some of my (EEM) short and added to my (GOOG) long this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost ever sector is rising and volume is above average. Investor anxiety is high. Today’s overall market action is very bullish. The VIX is falling -2.58% and is around average at 17.79. The ISE Sentiment Index is below average at 125.0 and the total put/call is around average at .81. Finally, the NYSE Arms has been running above average most of the day, hitting 1.68 at its intraday peak, and is currently .77. The Euro Financial Sector Credit Default Swap Index is rising +3.71% to 59.74 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 +3.37% to 80.58 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unhc. at 21 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10^th, 2008. The 2-year swap spread is falling -.97% to 26.55 basis points. The Libor-OIS spread is unch. at 11 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -10 basis points to 2.37%, which is down -28 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .04%, which is unch. today. Small-cap shares are outperforming today. A number of market leaders are outperforming, as well. Airline, REIT, hospital, bank, networking, disk drive and computer shares are especially strong, rising 1.75%+. (XLF) and (IYR) have traded well throughout the day. On the negative side, cds indices are mostly higher and long-term rates are moving back up. Moreover, considering Asia’s weakness last night, the banker grillings, terror rumors, (GOOG)/China news and bearish energy inventory data, today’s broad market action is even more impressive. Nikkei futures indicate a +105 open in Japan and DAX futures indicate an +35 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, technical buying, less economic fear, diminishing financial sector pessimism and lower energy prices.

Today's Headlines

Bloomberg:

- U.S. Secretary of State Hillary Clinton called on China to explain what Google Inc.(GOOG) described as a “highly sophisticated” attack on its Chinese web site aimed at e-mail accounts of human rights activists. “We look to the Chinese government for an explanation,” Clinton, who is in Hawaii on the first stop of an Asia-Pacific trip, said in a statement. The allegations “raise very serious concerns and questions.”

- The number of mortgage applications in the U.S. rose 14 percent last week, led by a rebound in refinancing activity. The Mortgage Bankers Association’s index of loan applications climbed to 528.1 in the week ended Jan. 8, from 462.2 a week earlier. The group’s refinancing gauge jumped 22 percent, while the purchase gauge advanced 0.8 percent.

- The cost of insuring against default by the Greek government surged to a record after Moody’s Investors Service said the country’s economy faces a “slow death” from deteriorating finances. Credit-default swaps on the nation’s debt rose 49 basis points to 328, the biggest one-day rise ever, according to CMA DataVision prices at 4:20 p.m. in London.

- Confidence in the world economy rose as an acceleration in manufacturing and service industries signaled a sustained recovery from last year’s recession, according to a Bloomberg survey of users on six continents. The Bloomberg Professional Global Confidence Index gained to 66.6 this month from 58.9 in December, reaching the highest level since the series began two years ago. The index exceeded 50 for a sixth month, which means there were more optimists than pessimists.

- The U.S. economy may expand 3 percent to 3.5 percent in 2010 with inflation remaining stable as bank lending and consumer spending pick up over the course of the year, Federal Reserve Bank of Chicago President Charles Evans said. “Looking ahead, restrictive bank credit, along with business and household caution, will continue to restrain the recovery’s strength,” Evans said today in the text of a speech in Coralville, Iowa. “Nevertheless I expect these headwinds to abate as we move through 2010.” “Unemployment will likely decline only modestly in 2010,” Evans said at the Corridor Economic Forecast Luncheon. “I think inflation will remain relatively stable.” “The 10 percent unemployment rate and the still very low rates of manufacturing capacity utilization are factors that reduce cost pressures and make firms less able to push through price increases,” he said.

- Crude oil fell for a third day after a U.S. government report showed gains in inventories of oil, gasoline and distillate fuel, including heating oil and diesel. Oil dropped as much as 3 percent as crude supplies rose 3.7 million barrels last week. Inventories were estimated to climb by 1.5 million barrels, according to the median of 17 analyst estimates in a Bloomberg News survey. “The distillate number was an absolute shocker,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “These are bearish numbers, with plus signs in front of the three major categories.”

- Former Vice President Al Gore joined a dozen Senate Democrats in opposing a Republican effort to block the Environmental Protection Agency from placing limits on greenhouse-gas emissions. The Republicans may soon try to “strip” the EPA of “its ability to regulate most carbon pollution, letting the worst polluters off the hook,” Gore, who won an Oscar and a Nobel Peace Prize for his efforts to publicize global warming, said yesterday in an e-mail to supporters. A Senate confrontation over the Obama administration’s move to limit emissions from cars, trucks and industrial sources may come as early as next week. Murkowski’s effort to block EPA regulation of greenhouse gases, which scientists have linked to global warming, “is not about the science of climate change,” Dillon said. “This is simply about the effect EPA regulation will have on the U.S. economy.” The Obama administration, which wants Congress to pass cap- and-trade legislation, is using proposed agency regulations “as a cudgel to try to beat the Senate into passing economically crippling climate legislation,” Dillon said.

- Record corn and soybean production in the U.S., the world’s largest grower and exporter, may extend a slump in prices this month to more than 20 percent before the next harvest in September, said Roy Huckabay at the Linn Group. Farmers will sow more of both crops this year on land used for winter wheat that was left vacant in late 2009 because of heavy rain, Huckabay said. The increase would add to corn output that the U.S. Department of Agriculture said yesterday jumped 8.8 percent last year as soybean production surged 13 percent.

- Domino's(DPZ), the second-largest U.S. pizza maker, said Internet orders make up the fastest-growing part of its business, accounting for as much as 30 percent of sales in some markets.

- High-frequency traders, whose lightning-fast stock and options tactics have been called unfair by senators, will learn how far U.S. regulators may go to rein them in. The Securities and Exchange Commission is asking brokerage firms, traders and exchanges to weigh in on the practice, which describes strategies that depend on high-speed executions, usually less than a millisecond.

- Google Inc.(GOOG) users in China gathered to place flowers and candles outside the Beijing office after the company said it may withdraw from the world’s biggest Internet market. “Life will be difficult without Google,” said Yao Lina, 30, an accountant working for a heavy industry company. “Google’s functions for translations and searching for pictures and video clips are very unique and helpful and I am afraid there’s no substitute for that.”

- Ford Motor Co.(F) Chief Executive Officer Alan Mulally, whose company gained market share in the U.S. last year while his domestic rivals went bankrupt, is the toast of the North American International Auto Show this week.

Wall Street Journal:

- International aid groups scrambled to deliver food, medicine and other supplies to Haiti, where the strongest earthquake in more than two centuries has toppled buildings and raised fears that thousands are dead. Haitian President Rene Preval described the devastation as "unimaginable," in an interview with the Miami Herald. He called for quick international action. "Parliament has collapsed. The tax office has collapsed. Schools have collapsed. Hospitals have collapsed,'' Mr. Preval told The Herald. "There are a lot of schools that have a lot of dead people in them.'' Other Haitian officials gave much higher estimates of the death toll -- though those estimates were based on the extent of the destruction rather than counts of the dead. Prime Minister Jean-Max Bellerive told CNN: "I believe we are well over 100,000,'' while leading senator Youri Latortue told the Associated Press that 500,000 could be dead. Both admit they have no way of knowing.

- Wall Street's biggest banks acted like used-car salesmen knowingly selling lemons to consumers, the head of a commission investigating the financial crisis said Wednesday, as top bank executives came under fire on Capitol Hill. Former California State Treasurer Phil Angelides kicked off the first of two-days of hearings with a heated exchange with Goldman Sachs Group Inc.(GS) Chairman and Chief Executive Officer Lloyd Blankfein.

MarketWatch.com:

- Hedge funds had a great year in 2009. But which managers passed the tougher test of making money in both 2008 and 2009? Soros Fund Management, Caxton Associates, Paulson & Co. and Brevan Howard are among that select group. Other firms that managed the feat include King Street Capital, Balyasny Asset Management, Bridgewater Associates and Tewksbury Capital Management, according to investors. The Quantum Endowment fund, run by George Soros, gained just over 8% in 2008 and had jumped 28% in 2009 through the end of November, according to a hedge fund investor.

CNBC:

- U.S. economic activity remained at a low level as 2010 began but was improving modestly and beginning to broaden out to include wider swaths of the country, the Federal Reserve said on Wednesday. "Reports from the 12 Federal Reserve districts indicated that while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report,'' according to the periodic Beige Book report compiled this time by the Philadelphia regional Fed bank.

NY Times:

- Google(GOOG) is far from alone among Western companies in its growing unhappiness with Chinese government policies, although it is highly unusual in threatening to pull out of the country entirely in protest. Western companies contend that they face a lengthening list of obstacles to doing business in China, from “buy Chinese” government procurement policies and growing restrictions on foreign investments to widespread counterfeiting. These barriers generally fall into two broad categories. Some relate to China’s desire to maintain control over internal dissent. Others involve its efforts to become internationally competitive in as many industries as possible.

The Business Insider:

- Short traders are piling onto Exxon Mobil, Host Hotels, Citi, Qwest, and Ford according to latest short interest data from the New York Stock Exchange (NYSE).

- Mike Mayo: How Banking Became An Industry On Steroids In 10 Steps.

- Why Shanghai Real Estate Is The Most Obvious Bubble Ever.

SeekingAlpha:

- I’ve written a few Apple (AAPL) articles in my time but none of them are as important to your portfolio as this one. Investors dream about finding obvious disconnects. Widespread misunderstanding leads to huge opportunity. We have such a scenario developing with Apple. Although Apple is the most widely followed stock on Wall Street it is clearly the most misunderstood. The current perception among traders is that Apple is expensive because of its 150% rally off of the March 2009 lows. The average forward P/E ratio for Apple since 2003 is 22.48. Any guesses what it is now? Based on the new accounting rules soon to be put in place, and the 37 billion in cash that Apple has on their books, Apple’s forward P/E is below 13. This stock has not been priced this cheaply since Steve Jobs came back to Apple in 1997.

Dallas Morning News:

- T. Boone Pickens cuts order for wind turbines, puts Panhandle wind farm on hold. T. Boone Pickens has cut his massive order for wind turbines from GE(GE) by more than half. The energy investor, who made wind power a key part of his plan to wean Americans off foreign oil, said Tuesday he will now take delivery of 300 turbines, which he will use for wind farms in Canada and Minnesota. None of the turbines will come to Texas, as originally planned.

Real Clear Markets:

- The Goldman Sachs(GS)-AIG(AIG) scandal may be worse than we think. Former New York Fed President and current Treasury Secretary Timothy Geithner is being castigated for paying off AIG's counterparties - Goldman foremost among them - 100 cents on the dollar and then keeping these payments secret. But it seems likely that Goldman actually got much more than 100%. What is worse, Goldman may have received this windfall by trading on information that was deliberately withheld from the public.

LATimes:

- For China's low-cost jewelry makers, it was an open trade secret: The metal cadmium is shiny, strong and malleable at low temperatures, regardless of its health hazards. And it's cheap. Despite the risks, manufacturers in factories ringing this city on China's east coast say their top priority is profit. So offering cut-rate goods often means using lower quality materials, including cadmium, which is known to cause cancer. "Business is business, and it's all up to our client," said He Huihua, manager of the Suiyuan Jewelry Shop at International Trade City in Yiwu, a sprawling wholesale mecca where sellers pitch their wares in hopes of landing a lucrative export contract. Asked what he thought about the health risks associated with cadmium and other toxic metals, He said: "I can't be overly concerned about that."

- Reporting from Sacramento - A proposal to legalize and tax marijuana in California was approved by a key committee of the Assembly on Tuesday, but it is not expected to get further consideration by the Legislature until next year. Despite a procedural glitch, backers hailed the committee's action as historic because it represented the first legislative approval of the proposal. "This vote marks the formal beginning of the end of marijuana prohibition in the United States," predicted Stephen Gutwillig, California state director of the Drug Policy Alliance, a pot legalization group.

Rassmussen:

- Support among Nevada voters for embattled Senate Majority Leader Harry Reid’s reelection has fallen even further following disclosure in a new book of remarks he made about Barack Obama during Election 2008. A new Rasmussen Reports telephone survey of likely voters in Nevada finds Reid earning just 36% of the vote against his two top Republican challengers. That’s a seven-point drop from 43% a month ago.

Politico:

- At a time when as many as nine Republicans are queuing up for a shot at Sen. Blanche Lincoln (D-Ark.), a key Democratic constituency hasn’t entirely bought into the idea of her reelection to a third term: liberals. Even before Lincoln announced her opposition to the public health insurance option, she had frustrated Arkansas progressives with her opposition to the Employee Free Choice Act. Some in the African-American community, meanwhile, have complained that the senator hasn’t been aggressive enough in promoting black judges to the federal courts. While, according to some state political observers’ estimates, liberal voters account for only 15 percent to 25 percent of the voting public in Arkansas, their unrest has further imperiled her political standing as the sole Southern Democratic senator up for reelection in 2010.

- Republican senators are backing down from efforts to topple Sen. Harry Reid, having concluded that the Nevada Democrat has done more to hurt himself than they could do with an inevitably futile drive to oust him as Senate majority leader. In the immediate wake of news that Reid had referred to Barack Obama as a “light-skinned” African-American with no “Negro dialect,” a number of GOP leaders — including Republican National Committee Chairman Michael Steele — said the majority leader should resign. But Senate Minority Leader Mitch McConnell (R-Ky.) declined to join the chorus Wednesday. And immediately afterward, several other GOP senators decided not to jump into the fray. Republicans say Reid has done enough to embarrass himself — and to make his already tough bid for a fifth term even harder.

24/7 Wall St.:

- Short sellers sharply increased their bets against two of America’s most widely followed stocks. Shares sold short in Citigroup (C) rose 36% to 381 million. The short interest in Apple (AAPL) soared 34% to 15.6 million. Among Nasdaq stocks, other significant changes included a 13% increase in shares sold short in Nvidia (NASDAQ:NVDA) and 11% increase in the short interest in Qualcom (NASDAQ:QCOM).

Zerohedge:

- Did Goldman(GS) Sell Its $2.5 Billion AIG(AIG) CDS While In Possession Of Material, Non-Public Information?

TheStreet.com:

- Hedge Fund Industry Trends From Heidrick & Struggles: Industry Re-Crosses $2 Trillion Mark, But 20% Of Hedge Funds Shut Down.

Reuters:

- BP Plc will spend $10 billion in Egypt on gas and oil exploration activities over the coming years, its chief executive officer was quoted on Wednesday as saying.

- TriQuint Semiconductor Inc (TQNT) raised its outlook for the fourth quarter, helped by increased holiday season demand, and said it continues to expect 'solid' revenue growth in 2010, sending its shares up 8 percent.

Financial Times:

- Demand for gold from investors last year overtook global jewellery demand for the first time since 1980, according to GFMS, the precious metals consultancy, which expected a “bumpy” return to record prices by the summer.

Digitimes:

- Quanta Computer is expected to ship 3.5-3.7 million notebooks in January 2010 mainly benefiting from shipments of one million MacBooks to Apple(AAPL), according to industry sources. Apple shipped about seven million notebooks in 2009 with most of the orders placed to Quanta and some to Foxconn Electronics (Hon Hai Precision Industry). Apple's monthly order volume to Quanta has also grown from only 300,000-400,000 units in the first half of 2009 to one million units in the fourth quarter of 2009, the sources noted. Despite the first quarter being the traditional slow season, Apple is expected to continue placing orders for about one million units to Quanta in January to cover the Lunar New Year period. However, Quanta's notebook shipments in the first quarter of 2010 are still expected to drop 5% sequentially due to the Lunar New Year causing February to have less working days, as well as shortages of components such as DRAM and optical drives.

Aswat al-Iraq:
- Iraq Drilling Co. plans to double the number of oil wells it drills this year to more than 100 in different parts of the country, citing Idris al-Yasiri, the state-run company’s director general.