Style Underperformer:
Mid-Cap Growth (-.05%)
Sector Underperformers:
Airlines (-.96%), HMOs (-.92%) and Steel (-.65%)
Stocks Falling on Unusual Volume:
MT, X, TIE, STO, ICE, EXBD, ULTI, TLVT, FSYS, DF, SCL, EOG, IBA and LYV
Stocks With Unusual Put Option Activity:
1) XL 2) FSYS 3) ADBE 4) EOG 5) ARUN
Style Outperformer:
Large-Cap Value (-.55%)
Sector Outperformers:
I-Banks (+1.05%), Banks (+.52%) and Insurance (-.06%)
Stocks Rising on Unusual Volume:
AMG, SF, GET, AHL, AIG, NTGR, OPEN, MYRG, CERN, FNSR, MICC, BIDU, DIOD, MRCY, ASPS, AMTD, TSRA, SF, GIIL and CXW
Stocks With Unusual Call Option Activity:
1) WMB 2) TLAB 3) NWS 4) MU 5) CTXS
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Late-Night Headlines
Bloomberg:
- German Finance Minister Wolfgang Schaeuble will brief lawmakers today on steps he may take to support the Greek government as it braces for a wave of strikes protesting deficit-reduction plans. “We are considering support,” Michael Meister, financial- affairs spokesman for Chancellor Angela Merkel’s Christian Democratic Union, said in an interview yesterday. Schaeuble was scheduled to speak in Berlin at 7:45 a.m. local time. The euro’s slide to a nine-month low and surging bond yields prompted leaders to drop their resistance to rescuing Greece and protect the rest of the euro region from market turmoil. “We are talking about support in the broad sense,” Olli Rehn, the EU’s new economic affairs commissioner, said yesterday. Meister said aid would come “under strict conditions and if the Greek government undertakes far-reaching state reforms.” “I’m not surprised it happened, just by the timing of it,” said Julian Callow, chief European economist at Barclays Capital in London. “They would have to structure it in a way that it’s sufficiently penal so as not to create a moral hazard issue and encourage other countries like Portugal, Spain and Ireland to keep on track in terms of getting their own houses in order.” In the interview in Strasbourg, Rehn, pointed to tomorrow’s summit and a meeting of European finance ministers next week and indicated that Greece will be held to strict conditions in exchange for any backing. “Solidarity goes both ways,” Rehn said. “I am sure that in the next couple of days we will see discussion and decisions to this effect.”
- Prime Minister George Papandreou’s drive to get Greece’s ballooning budget under control will be challenged in the streets today as striking labor unions shut down schools, hospitals and flights. Air-traffic controllers and civil-aviation workers are effectively closing down Greek air space as part of the 24-hour work stoppage by ADEDY, the umbrella group representing about 600,000 civil servants. Some 483 international and domestic flights have been cancelled, a spokeswoman for Athens International Airport, Greece’s biggest, said by phone. Protests against Papandreou’s plans to freeze wages and reduce benefits come after European Union leaders, set to meet at a summit in Brussels tomorrow, signaled they may aid the country if progress in cutting the deficit is made. “The concern is whether the strike will be a one-off or the first of a long series of street demonstrations involving other parts of the economy,” said economist Giada Giani of Citigroup Global Markets in London. “We need to see a prolonged period of strikes before we know whether the government’s willingness will be affected.”
- U.K. lawmakers advised the government to challenge a proposed European Union law regulating hedge funds and private equity because it could make it harder for EU funds to compete. The government “should not agree” to the rules unless they are “compatible with equivalent legislation with regulatory regimes in third countries and in particular in the United States,” the House of Lords European Union Committee said in a report today. Fund managers risk losing “competitiveness at a global level” according to the report. “It will mean Cayman Island funds run by European managers will be more expensive than Cayman funds managed from the U.S., and that is dangerous,” Andrew Shrimpton, a former U.K. regulator who now advises hedge funds at Kinetic Partners LLP, said in a telephone interview. “The asset management industry is an Anglo-American industry.”
- Galleon Group LLC founder Raj Rajaratnam faces new insider-trading charges based on evidence provided to prosecutors by alleged accomplices who are now cooperating with the government. In the last month, Anil Kumar, a former McKinsey & Co. director, Rajiv Goel, a former managing director in Intel Corp.’s treasury group, and Mark Kurland, co-founder of New Castle Funds LLC, have pleaded guilty to federal insider trading charges. Based on information from the three, prosecutors today unsealed an expanded indictment that added new charges against Rajaratnam.
- China’s “bubble” may burst by 2011 following “restrictive” measures by the nation’s central bank, said Tiberius Asset Management AG, which manages about $1.8 billion in assets including commodities. Chinese regulators, aiming to stem rising inflationary pressures, moved last month to slow a credit boom with measures to restrict lending. “We expect the China bubble to pop by 2011, but no earlier than the end of 2010,” Zug, Switzerland-based Tiberius said in a monthly report distributed today. “
- Oil fell in New York after an industry report showed crude and gasoline stockpiles in the U.S. increased last week, indicating demand from the largest energy consuming country may be weak. Oil declined after the American Petroleum Institute said crude inventories rose to the highest since October last year and gasoline supplies reached the highest since March 1999. “There is plenty of oil out there,” said Peter McGuire, a managing director at CWA Global Markets Pty in Sydney. “There is no shortage of supply and demand is relatively weak.”
- Brazil may break patents on U.S. goods in accordance with a World Trade Organization ruling allowing it to impose trade sanctions in retaliation for U.S. cotton subsidies, a Brazilian trade official said. “We intend to retaliate on intellectual property rights and services,” Marcio Cozendey, head of the economic department of Brazil’s foreign ministry, told reporters in Brasilia. “Breaking patents is a possibility,” he added without providing additional details. The WTO ruled in August that Brazil has the right to impose $294.7 million annually in sanctions against the U.S. because of subsidies paid to American cotton farmers, the second highest amount ever permitted by the Geneva-based trade arbiter. Brazil says that amount has since grown as U.S. payments to cotton farmers exceed a specific cap. Cozendey said Brazil can impose up to $830 million in sanctions, including $560 million on goods and the rest on intellectual property rights and services. Brazil’s government will take a decision this month on which of 222 eligible products it will impose the sanctions, Celio Porto, an agricultural ministry trade official said in an interview. The list of potential targets includes agricultural and textile products as well as U.S. exports such as electronics, cosmetics, ketchup, cars, chewing gum, medical equipment and pharmaceuticals. “The broader our retaliation the better it will be, as it increases the pressure on the U.S.,” Cozendey said, adding that U.S. trade officials have cited difficulties in winning congressional approval to end the cotton program.
- Container lines will have ninefold the amount of shipping capacity operating at "extra-slow" speeds in March compared with June 2009, as they seek to cut fuel costs and absorb idle capacity, according to AXSMarine. So-called extra-slow shipping capacity was 46,000 twenty-foot containers in June 2009 and will be 406,000 next month. China Cosco Holding Co. and Nippon Yusen K.K. are among the companies that have lowered container-ship speeds to improve engine efficiency. A 10% pace reduction can pare fuel consumption by as much as 30%, according to Det Norske Veritas, which assesses seaworthiness of vessels. Slower ships may not be enough to restore "meaningful" profits this year because new vessels are being delivered, said Jay Ryu, an analyst at Mirae Asset Securities Co. in Hong Kong. About 10% of the current container fleet is now idle and another 742 ships are on order, equal to about 35% of existing fleet capacity, according to AXSMarine.
- The dollar rose against the euro before the release of Federal Reserve Chairman Ben S. Bernanke’s testimony on the central bank’s strategy for ending its policy of low interest rates. The U.S. currency also gained versus 13 of its 16 major counterparts ahead of U.S. reports this week that economists said will show the trade deficit narrowed and retail sales rebounded, boosting the appeal of the nation’s assets. The pound was near a three-week low against the euro on speculation the Bank of England will today cut its economic-growth forecast in its quarterly report. “Demand for the dollar will increase if Bernanke’s remarks indicate the U.S. is heading for exit,” said Toshiya Yamauchi, manager of currency margin trading at Ueda Harlow Ltd. in Tokyo.
Wall Street Journal:
- 10 GOP Health Ideas for Obama by Newt Gingrich and John C. Goodman. We don't need to study lawsuit reform for one minute longer. 'If you have a better idea, show it to me." That was President Barack Obama's challenge two weeks ago to House Republicans regarding health-care reform. He has since called for a bipartisan forum, not to start over on health reform but to "move forward" on the "best ideas that are out there." The best ideas out there are not those that were passed by the House and Senate last year, which consist of more spending, more regulations and more bureaucracy. If the president is serious about building a system that delivers more quality choices at lower cost for every American, here's where he should start:
- The largest U.S. banks have a total exposure of $176 billion to four weak European countries whose debt problems have sent shudders through global financial markets in recent days. According to a report by Barclays Capital, 73 large U.S. banks have exposure of $82 billion to Ireland, $68 billion to Spain, $18 billion to Greece and $8 billion to Portugal. The report said the level of exposure was relatively low. It also suggested U.S. banks faced limited risk because much of the balance was collateralized. "Most of this exposure, which includes low-risk collateralized transactions such as repurchase agreements, is concentrated at the 10 largest U.S. banks," Barclays analysts Jonathan Glionna and Miguel Crivelli said in the report. "In aggregate, exposure to these four countries is approximately 5% of the total foreign exposure of U.S. banks." Citing the banks annual reports, the analysts said J.P. Morgan had $18.4 billion in exposure to Spain, while Bank of New York Mellon Corp. had $2.32 billion exposure to Ireland. "Concern regarding the creditworthiness of Ireland, Greece, Portugal and Spain is elevated," report said. "Lately this has affected bank spreads, which remain volatile and sensitive to broad market risk tolerance." Though "the direct risk of the large U.S. banks to Ireland, Greece, Portugal, and Spain is modest," Barclays said "sovereign risk has supplanted regulatory risk as the primary focus of bank bondholders."
- Morgan Stanley(MS) Chief Executive James Gorman's pledge last week to reduce the firm's compensation ratio followed prodding from some large shareholders about unusually high employee payouts in 2009, according to people familiar with the situation. Company officials acknowledge being questioned by investors since Morgan Stanley reported three weeks ago that compensation and benefits last year were equal to 62% of net revenue at the New York company.
CNBC:
- A look at whether the copper bubble is about to burst, with David Threlkeld, Resolved Inc. president. (video)
Business Insider:
- Paterson Aide Blasts New York Times For Not Squelching Sex-And-Drug Scandal Rumor.
Politico:
- The Obama administration's efforts to find common ground with congressional Republicans ran into two pockets of resistance Tuesday: House Speaker Nancy Pelosi and House Minority Leader John Boehner. At a closed-door White House session, Pelosi expressed skepticism over an administration proposal to offer tax breaks to businesses that create new jobs. And Boehner urged President Barack Obama to abandon much of the Democrats' current agenda on the ground that it's killing jobs by creating uncertainty in the markets. The White House session with congressional leaders was supposed to be a step toward bipartisanship, with a focus on jobs. But Pelosi made it clear that there's disagreement, even among Democrats. White House economic advisers Christina Romer and Larry Summers defended the administration's proposal to give employers a $5,000 credit for each new worker they hire as well as help with Social Security taxes. Pelosi countered that no one she's consulted believes that the plan will actually lead to the creation of new jobs, sources said. “She questioned the efficacy of it,” one Democratic aide said.
Rasmussen Reports:
- The new national telephone survey shows that 44% would vote for their district’s Republican congressional candidate while 36% would opt for his or her Democratic opponent. Voter support for GOP congressional candidates is down one point from last week, while support for Democrats is down two points.
The Detroit News:
USAToday:
AP:
- The New York Senate has passed a resolution opposing trials of terrorists being held in New York City. The resolution passed Tuesday urges President Barack Obama and Attorney General Eric Holder to move trials of those linked to the Sept. 11 terrorist attacks back to the military tribunal system. Republican state Sen. Vincent Leibell (LY'-bel) introduced the resolution. He says holding the terror trial in the city would unnecessarily put New Yorkers at risk. Opponents to the trial also argue that it could have a staggering economic impact on businesses, disrupt city residents and cost taxpayers hundreds of millions of dollars. The Obama administration has said other sites are under consideration for the trial.
- Target Corp.(TGT) is pulling its Valentine's Day "Message Bears" from store shelves after California's attorney general raised concerns that the toys have illegal levels of lead. The announcement Tuesday comes after a letter sent by Attorney General Jerry Brown said that testing revealed lead levels that violate federal law. Target spokeswoman Beth Hanson says the Minneapolis-based company will pull the bears, which were made in China, from store shelves while it investigates.
The Salt Lake Tribune:
Reuters:
- Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan. While far from representing fixed government policy, the open demands for retaliation by the PLA officers underscored the domestic pressures on Beijing to deliver on its threats to punish the Obama administration over the arms sales. "Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease," said Luo Yuan, a researcher at the Academy of Military Sciences. "Just like two people rowing a boat, if the United States first throws the strokes into chaos, then so must we." Luo said Beijing could "attack by oblique means and stealthy feints" to make its point in Washington. "For example, we could sanction them using economic means, such as dumping some U.S. government bonds," Luo said. The warnings from the PLA come after weeks of strains between Washington and Beijing, who have also been at odds over Internet controls and hacking, trade and currency quarrels, and President Barack Obama's planned meeting with the Dalai Lama, the exiled Tibetan leader reviled by China as a "separatist." China is likely to unveil its official military budget for 2010 next month, when the Communist Party-controlled national parliament meets for its annual session. The PLA officers suggested that budget should mirror China's ire toward Washington. "Clearly propose that due to the threat in the Taiwan Sea, we are increasing military spending," said Luo. "China's attitude and actions over U.S. weapons sales to Taiwan will be increasingly tough," the magazine cited him as saying. "That is inevitable with rising national strength."
- The second major snowstorm in less than a week hit the U.S. East Coast on Tuesday, with predictions of 14 inches (36 cm) or more stretching from Washington, D.C., to New York City, forcing the United Nations to close and the U.S. Congress to curtail legislative action. Government offices in Washington will be closed on Wednesday -- the third straight day at a cost of roughly $100 million in lost productivity per day -- and the National Weather Service predicted the U.S. capital could get upward of 14 inches (36 cm) by Wednesday night.
Financial Times:
- State-linked Dubai entities have started talks to divest Asian assets as the emirate steps up the pace of its overseas asset sales to help ease its debt burden. Dubai-based Emaar Properties is talking to potential buyers of its majority stake in Singapore-based distributor and retailer RSH, according to people familiar with the matter. RSH, which works with brands including Zara and Mango, operates across Asia and the Middle East. State-linked Dubai entities have started talks to divest Asian assets as the emirate steps up the pace of its overseas asset sales to help ease its debt burden. A unit of Dubai Holding, which is looking to sell its 40 per cent stake in Malaysia’s Bank Islam, has appointed Rothschild to seek potential buyers. Dubai Holding is owned by the emirate’s ruler, Sheikh Mohammed bin Rashid al-Maktoum. These sales processes indicate that Dubai entities in addition to the Dubai World conglomerate are seeking to sell off better-performing, non-core assets as the emirate seeks to reduce its US$100bn-plus in debts. Dubai World is restructuring US$22bn in debts, and has put some of its highest-profile assets on the block. Istithmar, the investment arm, last week put Inchcape Shipping Services, the marine services group, up for sale.
- The chief executive of one of Europe’s biggest banks has warned that the continent’s nascent economic recovery could be thrown into crisis, particularly in eastern Europe, if the threat of a “heart attack” in Greece was not addressed. Alessandro Profumo, chief executive of Italy’s UniCredit, which itself has a vast network of banking operations across eastern Europe, said: “The recovery is still so fragile that we don’t need any heart attack, or even high blood pressure. We don’t need other shocks.” Mr Profumo said a growing aversion to risk triggered by a worsening of the situation in Greece would hit the cost of doing business in central and eastern Europe hard. Like UniCredit, Greek banks, particularly National Bank of Greece, have a widespread network of interests across eastern Europe. Despite the risks, Mr Profumo said UniCredit could benefit from a decline of competition across the region, as rivals owned by troubled parents in Ireland, Germany and Austria were all in retrenchment mode. But he said he would be making no further acquisitions.
TimesOnline:
- Angela Merkel tried to calm fevered speculation in financial markets yesterday that Germany was preparing to lead a bail-out of Greece amid a split in the EU on how to handle its most ailing member. The German Chancellor denied reports that her Finance Minister was conducting secret talks with Jean-Claude Trichet, head of the European Central Bank, and with other capitals on an EU rescue fund for Athens. Mrs Merkel has staunchly resisted suggestions that the EU must swallow its pride and turn to the Washington-based IMF for a solution to the growing economic turmoil in Greece, with fears that its troubles in international finance markets will trigger a domino effect, toppling other weak members of the eurozone such as Ireland, Portugal, Spain and Italy. But last night there were signs of a developing European split over calling in the International Monetary Fund, a move also strongly opposed by Brussels, with suggestions from Sweden’s Finance Minister and other officials that this might be better than the EU program outlined last week.
Telegraph:
- UK businesses threaten to pull out of China over protectionism. Senior business leaders complained in interviews with the Daily Telegraph that they were operating in the worst conditions they had seen for decades. Faced with regulations that are often impossible to meet and a climate of overwhelming protectionism, many said they are now openly considering whether to leave the world's biggest market. "We are bracing ourselves for departures this year from UK businesses, some of which are starting to question the economics of continuing to do business in China," said one diplomatic source. He added that the insurance and financial services sectors were particularly angry as profits and market share failed to materialize in the face of regulatory obstruction. However, almost every sector has been hit by new requirements that aim to force foreign companies out and boost the country's domestic players. In the wake of Google's decision to stand up to the Chinese government, other firms have complained of a witch-hunt against foreigners that has targeted British, American and European companies with intellectual property theft, blocked market access, rigged tender processes and the deliberately inconsistent enforcement of regulations. "We have been here since 1995," said the head of one technology company that did not wish to reveal its identity for fear of reprisals. "We have 1,200 Chinese staff and only four foreign managers. But now we see subsidies going to our rivals, which are mostly state-owned firms," he added. "And then there are regulations that force our clients to buy from only Chinese companies. The government is forcing all the companies in our field to be specially-certified. But no foreign firms are allowed to have the certificate," he said, adding that China has become significantly more assertive since the financial crisis. His options are now limited. The company can hand its technology over to a Chinese partner in a bid for certification, but then risks losing its intellectual property. One firm in the booming renewable energy field said that China had not signed up to the parts of the WTO that would prevent it from structuring contracts in order to force out foreigners. "There is a neat little system between state-owned utility companies, the government and Chinese suppliers," said the company. "But if they are aiming to build companies that become truly international, shielding them from competition is not the way to do it. That way, they will never be able to compete when it comes to quality standards, industry best practices and international tender processes." Firms operating in the private sector are also finding business conditions desperately difficult. "Our business is still 50pc down from pre-financial crisis levels," said one senior manager at a medium-sized UK accounting firm. "If you are operating outside the orbit of the government stimulus package, life is still very tough." "Foreigners don't have the money anymore," said the European Chamber. "They just have the know-how. And there is a feeling that China can develop the know-how on its own. What we are seeing is almost an isolationist stance." Meanwhile, a manager at a retail company put it more bluntly: "The idea that China was one day going to be a lucrative market for foreign companies was just an illusion."
Les Echos:
- France's Cour des Comptes estimates that the country's public debt could be close to 100% of gross domestic product in 2013, citing the state audit body's annual report. "There is a risk party, though certainly not an automatic one, of a downgrade of the sovereign debt rating" if interest payments total more than 10% of levies by 2013.
Nikkei English News:
- Federal Reserve Bank of St. Louis President James Bullard said discussions could begin on an increase in US interest rates in the second half of this year if economic data improves, citing an interview.
Asia Times:
- Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE), nor at China’s large commercial banks. The Chinese government has ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee. This already has been communicated to American securities dealers, according to market participants with direct knowledge of the events. It is not clear whether China’s motive is simple risk aversion in the wake of a sharp widening of corporate and mortgage spreads during the past two weeks, or whether there also is a political dimension. With the expected termination of the Federal Reserve’s special facility to purchase mortgage-backed securities next month, some asset-backed spreads already have blown out, and the Chinese institutions may simply be trying to get out of the way of a widening.
Evening Recommendations
Citigroup:
- Reiterated Buy on (AGU), target $80.
- Reiterated Buy on (PHM), boosted target to $14.
- Reiterated Buy on (OPEN), raised estimates, boosted target to $38.
Night Trading
Asian indices are -.25% to +.75% on avg.
S&P 500 futures -.27%.
NASDAQ 100 futures -.23%.
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Earnings of Note
Company/Estimate
- (MT)/.27
- (CSC)/1.23
- (DISCA)/.36
- (ICE)/1.14
- (JNY)/.11
- (PFCB)/.40
- (S)/-.19
- (WYN)/.37
- (ALL)/1.01
- (BSX)/.13
- (MAS)/-.02
- (PRU)/1.11
Economic Releases
8:30 am EST
- The Trade Deficit for December is estimated at -$35.8B versus -$36.4B in November.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Plosser speaking, Fed's Tarullo speaking, Fed's Fisher speaking, Treasury's Geithner speaking, US Treasury's $25B 10-Year Note Auction, weekly MBA mortgage applications report, Bloomberg Global Confidence Index, (KMT) management meeting, UBS healthcare services conference, Thomas Weisel Tech/Telecom Conference, Stifel Nicolaus Transport Conference, Sterne Agee Financial Services Symposium, Goldman Sachs Ag Forum, Deutsche Bank Small/Mid-cap Conference, CSFB Financial Services Conference, Cowen Aerospace/Defense Conference and the BB&T Transport Conference could also impact trading today.
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