Late-Night Headlines
Bloomberg:
- Greece is benefiting from investor perception that European neighbors would "step in" to prevent a government debt default and safeguard the region's creditworthiness, said Canadian Imperial Bank of Commerce. Investors pushed up credit default swaps on Russian debt to as high as 1,116.7 basis points in October 2008 when S&P cut its outlook for Russia's BBB+ credit rating to "negative" in the wake of a five-day war with Georgia and the collapse of Lehman Brothers Holdings Inc. When S&P cut Greece's rating to the same level last month, swaps on its debt reached 289.2 basis points. "It won't be just a Greek problem if they fail, it'll be a problem for the whole of Europe," said Kazuaki Oh'e, a bond salesman in Tokyo at Toronto-based CIBC. "They are in trouble, but not so serious as to default. If the problem gets worse, the ECB, or Germany or France will step in."
- Chinese toys and sneakers headed to Wal-Mart Stores Inc.(WMT) and Target Corp.(TGT) on the U.S. East Coast may bypass Warren Buffett’s $33.8 billion railway as the expansion of the Panama Canal slashes the cost of shipping them by sea. The deeper, wider canal will allow A.P. Moeller-Maersk A/S, China Ocean Shipping Group Co. and other lines to ship more cargo directly to New York and Boston instead of unloading it on the West Coast for trains and trucks to finish the journey east. That could save exporters 30 percent, the canal operator said. The $5.25 billion Panama Canal project, scheduled for completion during its centennial in 2014, may take business from ports including Los Angeles and Seattle, and railroads including Berkshire Hathaway Inc.’s Burlington Northern Santa Fe Corp. It costs as much as $1,000 more per cargo container to use trains than ships, said Lee Sokje, a shipbuilding analyst at Mirae Asset Securities Co. in Seoul.
- The US dollar rose to a six-month high against the euro before U.S. reports that economists said will show durable goods orders gained and initial jobless claims fell, giving the Federal Reserve more reason to raise interest rates. “With Hoenig sounding relatively hawkish, they are a bit more upbeat than people had expected,” said Danica Hampton, a senior strategist at Bank of New Zealand Ltd. in Wellington. “The U.S. dollar is going to find a bit more support. I think that will be further supported with the U.S. GDP data.” “European sovereign risks are still dominating sentiment, suggesting interest rates there will likely stay low,” said Yuji Saito, director of the foreign exchange department at Calyon Bank in Tokyo. “The trend is for the euro to be sold.”
Wall Street Journal:
- President Barack Obama, seeking to recapture the promise of change the propelled him to the White House, returned to his pledges to remake Washington after a bruising first year that saw his approval ratings drop and his ambitious agenda founder. Pivoting to address an issue that has hurt the president and his party, Mr. Obama spent the heart of his address pledging to help spur job growth and the economy. He reiterated in strong terms his desire to see Congress pass the ambitious legislation last year, starting with a revamp of financial rules. He urged lawmakers to press on with the health care overhaul, a topic that has divided Washington, and one he turned to in the speech's second half.
- How would you grade President Obama's State of the Union speech?
- The Latest AIG Story. Will regulators ever coherently explain why AIG could not be allowed to go bankrupt in September of 2008? At yesterday's House hearing, Secretary of the Treasury Timothy Geithner and predecessor Hank Paulson said they didn't bail out AIG to save its derivatives counterparties. Instead, said Mr. Geithner, the now-famous 100-cents-on-the-dollar buyouts of credit default swap contracts were necessary to prevent a further downgrade of AIG by credit-ratings agencies. This topic probably deserves another hearing on its own. Remember, the Federal Reserve Bank of New York, where Mr. Geithner was president, had by that time already seized AIG. We're guessing that a ratings agency is pretty comfortable with the creditworthiness of a firm 79.9%- owned by Uncle Sam. Yet Mr. Geithner is saying that the same credit raters that applied triple-A ratings to tranches of junk mortgages somehow got the yips when the world's most respected borrower was standing behind AIG. If the agencies had applied to AIG the credit rating of its new owner, there wouldn't have been much need to send more collateral to such counterparties as Goldman Sachs. Instead, AIG could have demanded the return of some of the collateral it had already posted. Bad news for those counterparties. More broadly, the hearing showed that the story of why AIG could not be allowed to fail continues to change, which inspires little confidence that Washington can be trusted with new powers to identify and address systemic risk. Yesterday Messrs. Geithner and Paulson went further than ever in stating that the real systemic risk was to AIG's heavily regulated insurance businesses. Their testimony directly contradicts that offered to Congress by former New York Insurance Superintendent Eric Dinallo, who was AIG's principal insurance regulator at the time. Last year Mr. Dinallo told the Senate that "The main reason why the federal government decided to rescue AIG was not because of its insurance companies." He was so confident in the health of the AIG subsidiaries that, before the federal bailout, he was working on a plan to transfer $20 billion of their excess reserves to the parent company. We're not sure that policyholders were really in danger, but Mr. Dinallo and other state regulators deserve a chance to respond on the record, and under oath. If yesterday's testimony is true, the real systemic risk was not in unregulated markets where the danger is obvious, but in markets where regulation created the illusion of safety.
- Netflix Inc.'s (NFLX) fourth-quarter profit climbed 36% on higher sales and margins, and the company added more than 1 million subscribers during the quarter to reach its year-end target of 12.3 million. Shares jumped 13% to $57.75 in after-hours trading as the online DVD-rental pioneer's earnings topped its forecast while revenue was in line with guidance.
NY Times:
- The Apple(AAPL) iPad: First Impressions.
Fox Business:
- $1.5 Trillion Ways to Cut the Deficit. First in a three-part series on Fixing America. Don’t you feel that if you hear another rant about the deficit, about reckless spending, about the Supersize-me government, without policy ideas to fix this mess, that your head is going to explode? Don’t you feel like you are grinding your teeth into Tic Tacs every time you hear these debates? Fox Business is changing the debate. We found $900 billion to $1.5 trillion worth of ways to trim the fat marbled throughout government. And these are items that government officials say should be cut. Government officials whose salaries are paid for with taxpayer dollars are spending their days telling taxpayers how the government can cut waste. But instead of cutting $1.5 trillion, the government now wants to raise the nation's debt ceiling by $1.9 trillion to pay its bills. If it passes, the national debt would reach $14.3 trillion, equal to the size of the U.S. economy.
Business Insider:
Business Week:
- Toyota Motor Corp.’s(TM) image as the highest-quality automaker may have been permanently tarnished after an accelerator-pedal defect halted sales of the models that account for more than half its U.S. deliveries. Toyota’s “reputation for long-term quality is finished,” Maryann Keller, senior adviser at Casesa Shapiro Group LLC in New York, said today in an interview. “People aren’t going to buy Toyotas, period. It doesn’t matter which model. What’s happened is sufficient to keep people out of the stores.”
Politico:
- House Speaker Nancy Pelosi on Wednesday floated the idea of a two-track plan for health care reform — with Congress pursuing easier-to-pass incremental changes now and comprehensive reform later. “We believe that it’s possible to have comprehensive health care reform as we go forward, but at the same time, it can be on another track where some things can just be passed outside of that legislation, and we’ll be doing both,” Pelosi said in an interview with POLITICO. Though the Democrats’ loss of Ted Kennedy’s old Senate seat has complicated efforts to get the 60 votes they need for a sweeping health care bill, Pelosi insisted that comprehensive reform is still on the agenda. “We have to get it done,” the speaker said. “What the process is doesn’t matter. The outcome is what is important, and what it means to working families in America.”
Rasmussen Reports:
Reuters:
- Green Mountain Coffee Roasters Inc (GMCR) posted higher-than-expected quarterly results, driven by increased sales of the high-margin coffee refill packs used in its single-cup brewers, and raised its full-year outlook. Shares of the company were up 3 percent at $82.49 after the bell.
- Short interest on the Nasdaq rose 2.3 percent in the first half of January, the exchange said on Wednesday, suggesting an uptick in bearish sentiment in the stock market. As of January 15, short interest rose to about 6.55 billion shares from 6.4 billion shares as of December 31. This makes up 3.89 days' average daily volume, compared to 3.2 days in the previous period, the exchange said.
Financial Times:
- US finance chiefs are growing more confident in the near-term fortunes of their companies and the broader economic outlook, according to a fourth-quarter survey published on Thursday. Companies in the US will this year boost capital expenditure by 9 per cent and build inventory by 2.5 per cent, according to a poll of 371 chief financial officers conducted by Financial Executives International, a corporate finance lobby group, and Baruch College. Those polled estimated revenues would increase by 10 per cent and net profit by 22 per cent in the next 12 months. This is almost double the levels of growth they forecast in the third quarter of 2009, as cost cutting last year begins to boost 2010 margins. When asked in the third quarter to rate their optimism for the US economy and their companies between zero and 100, CFOs responded with an average score of 54.2 and 64.1 respectively. However, in the latest survey the score rose to 57 and 67.1 respectively. “This quarter tells us that modestly increased optimism is beginning to be carried forward into specific plans,” John Elliott, dean of Baruch’s Zicklin School of Business, told the Financial Times. However, in spite of the optimism, two-thirds of those polled said the first year of the Obama administration had weakened their outlook for the US economy.
- Why we should expect low growth amid debt.
Commercial Times:
- Taiwan Semiconductor Manufacturing Co. may have filled its expected order book for the first half of the year, citing equipment makers.
Evening Recommendations
Citigroup:
- Reiterated Buy on (NKE), target $75.
- Reiterated Buy on (PX), target $99.
- Reiterated Buy on (STI), target $24.
- Reiterated Buy on (OI), target $40.
- Reiterated Buy on (VAR), target $58.
- Reiterated Buy on (UTX), target $80.
Night Trading
Asian indices are +.50% to +2.0% on avg.
S&P 500 futures +.79%.
NASDAQ 100 futures +.58%.
Morning Preview
BNO Breaking Global News of Note
Yahoo Most Popular Biz Stories
MarketWatch Pre-market Commentary
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar
Who’s Speaking?
Upgrades/Downgrades
Politico Headlines
Rasmussen Reports Polling
Earnings of Note
Company/Estimate
- (LLL)/1.85
- (DLX)/.58
- (LCC)/-.48
- (D)/.61
- (CELG)/.62
- (RCL)/-.05
- (BDX)/1.20
- (OXY)/1.25
- (QSII)/.46
- (LMT)/1.99
- (RTN)/1.24
- (F)/.26
- (EK)/-.18
- (PG)/1.36
- (MOT)/.08
- (ZMH)/1.08
- (MO)/.39
- (T)/.51
- (MMM)/1.21
- (CA)/.42
- (RHI)/.05
- (MXIM)/.15
- (KLAC)/.28
- (MSFT)/.60
- (SNDK)/.69
- (JNPR)/.25
- (CB)/1.46
- (AMZN)/.72
- (CELG)/.62
- (OXY)/1.26
- (BAX)/1.03
- (EL)/1.17
- (OSK)/1.02
- (JBHT)/.32
- (LLY)/.91
- (BMY)/.42
- (CL)/1.18
Economic Releases
8:30 am EST
- The Chicago Fed National Activity Index for December is estimated to fall to -.40 versus -.32 in November.
- Durable Goods Orders for December are estimated to rise +2.0% versus a +.2% gain in November.
- Durables Ex Transports for December are estimated to rise +.5% versus a +2.0% gain in November.
- Initial Jobless Claims for last week are estimated to fall to 450K versus 482K the prior week.
- Continuing Claims are estimated to fall to 4593K versus 4599K prior.
Upcoming Splits
- None of note
Other Potential Market Movers
- The EIA natural gas inventory report, Treasury's 7-year Note Auction, BofA Merrill Gaming Conference and the (KMP) analyst meeting could also impact trading today.