Stocks Reversing Higher into Final Hour on Less Financial Sector Pessimism, Short-Covering, Technical Buying, Stable Long-Term Rates

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Every Sector Rising
  
• Volume: Above Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 30.04 -26.67%
  
• ISE Sentiment Index 80.0 +35.59%
  
• Total Put/Call 1.05 -12.50%
  
• NYSE Arms .91 -61.08%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 102.45 bps -21.08%
  
• European Financial Sector CDS Index 118.48 bps -27.84%
  
• Western Europe Sovereign Debt CDS Index 119.0 bps -26.84%
  
• Emerging Market CDS Index 241.23 bps -17.87%
  
• 2-Year Swap Spread 28.0 -10 bps
  
• TED Spread 28.0 -3 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .15% +3 bps
  
• Yield Curve 268.0 +7 bps
  
• China Import Iron Ore Spot $175.50/Metric Tonne +.29%
  
• Citi US Economic Surprise Index +14.70 +3.2 points
  
• 10-Year TIPS Spread 2.24% +9 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +140 open in Japan
• DAX Futures: Indicating -42 open in Germany

Portfolio:

• Slightly Higher: On gains in my Biotech, Retail, Medical and Tech long positions
  
• Disclosed Trades: Covered some of my (IWM), (QQQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bullish as equities trade substantially higher on decent volume despite a very muted bounce in the euro. On the positive side, Homebuilding, Steel, Oil Tanker, Coal and Airline stocks are especially strong, rising 6.0%+. The Spain sovereign cds is falling -31.77% to 162.90 bps and the eurozone investment grade cds index is plunging -22.2% to 94.66 bps, which are large positives. Oil is only 2.3% higher despite its recent decline and huge equity move higher. This is likely due to continuing worries over slowing global demand and the muted bounce in the euro. On the negative side, Telecom, Gold, Defense, Utility, Oil Service, Ag, Medical, Biotech, Drug and Education shares are underperforming today. The Shanghai Composite continues to trade poorly, just barely rising last night. The Japan sovereign CDS is up +9.2% today to 76.75 bps. The Libor-OIS spread is rising another +1 bp today to 19.0 bps. The 30-day asset-backed commercial paper yield is rising 2 bps to 31 bps, which is the highest since Dec. 4, 2009. Today's equity market reaction to Europe's actions is about what I would have expected, but the small rise in the euro is a large red flag, especially given how short traders are positioned against the currency. Part of the market's recent sell-off was related to the euro's disorderly decline. This bares close monitoring. Over the longer-term I still expect more weakness in the euro. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less sovereign debt fear, diminishing financial sector pessimism and bargain-hunting.

Today's Headlines

Bloomberg:

• Goldman(GS) Hedge Fund Head Flamand Said to Start Own Firm. Pierre-Henri Flamand, the head of Goldman Sachs Group Inc.’s largest internal hedge fund, is retiring from the world’s most profitable securities firm to start a hedge fund, according to three people with knowledge of his plans. Flamand, 39, has worked at Goldman Sachs for 15 years and has run Goldman Sachs Principal Strategies from London since 2007. He didn’t respond to calls or e-mails seeking comment. A Goldman Sachs executive in London confirmed the departure and said the company supports Flamand’s plan.
• A proposed transaction tax for stocks and derivatives trades would "turn back the clock" two decades, hurting investors and businesses as much as the bankers it targets, the U.S. Chamber of Commerce said in a report. The measure proposed by Senator Tom Harkin of Iowa and Representative Peter DeFazio of Oregon would cut trading volume, damaging the ability of businesses to "fuel expansion and keep people employed," David Hirschmann, head of the chamber's Center for Capital Markets Competitiveness, said.
• Natural Gas Drops to 15-Week Low on Ample Supply, Mild Weather. Natural gas futures fell to a 15- week low in New York after a weekly government report today showed supplies of the fuel will be ample during milder-than- normal weather at the end of the heating season. Inventories shrank 111 billion cubic feet in the week ended March 5 to 1.626 trillion cubic feet, according to the Energy Department report. Supplies were 1.2 percent above the five-year average, unchanged from the last week’s report. “We’re going to end the heating season a little bit above the five-year average,” said Tom Orr, research director at Weeden & Co., a brokerage in Greenwich, Connecticut. U.S. inventory levels for this cold-weather season reached a record 3.837 trillion cubic feet in November as higher output swamped a market where industrial demand was weak because of the recession.
• U.S. Foreclosure Filings Increase at Slowest Pace in Four Years. A total of 308,524 properties received a notice of default, auction or seizure last month, or one in 418 households, the Irvine, California-based seller of default data said today in a statement. Filings rose 6 percent from a year earlier, the smallest increase since RealtyTrac began tracking annual changes in January 2006. They declined 2 percent from January.
• Economy in U.S. to Cool as Drivers of Growth Shift, Survey Says. Efforts to stabilize inventories will contribute less to the U.S. economy in coming months, leaving business investment and exports to propel growth, according to economists surveyed by Bloomberg News. The world’s largest economy will expand at an average 2.75 percent annual rate in the first six months of the year, down from a prior estimate of 2.9 percent and a 5.9 percent surge in the fourth quarter, according to the median estimate of 52 economists. The survey, taken from March 1 to March 10, also showed the outlook for consumer spending improved.
• Stock Momentum Measure Signals More Gains: Technical. The yearlong rally in the U.S. market has pushed the number of stocks showing unusually strong momentum to the highest level since at least 1994, a sign that more gains may come, according to Concept Capital. The New York-based institutional broker defined “overbought” as when a stock’s 21-day stochastic reading exceeds 80. On March 9, 77 percent of the companies in the Standard & Poor’s 1500 Composite index reached that threshold, exceeding the previous high of 74 percent in April, Concept Capital said. “While a sign of a short-term overbought condition, which could usher in a pause, readings this extreme have historically led to higher prices over the next several months,” John Kolovos and Craig Peskin, technical analysts at Concept Capital, wrote in a note to clients yesterday. Using stochastics, which analyzes momentum to capture a security’s turns in direction, Kolovos and Peskin identified the previous nine most overbought conditions from 1994 to the present and found that, following these days, the S&P 1500 on average rose 1.9 percent in one month, 4.7 percent in three months, and 8.5 percent over the next six months. The current spike in the S&P 500’s level of overbought stocks is the fourth highest dating back to 1990, the Concept strategists said.
• China Tightens Land Purchase Rules, Bans Villas. China is requiring a down payment for land purchases equal to 50 percent of a plot’s price and prohibited the supply of land for villas as the government sought to increase affordable housing. The down payment must be paid within a month of signing the purchase contract, the Ministry of Land and Resources said in a statement on its Web site late yesterday. Buyers must also pay a deposit when taking part in land auctions that is equal to 20 percent of the minimum price for the land.
• Iran Oil Fund to Expand If Crude Stays Above $65. Iran, holder of the world’s second- biggest oil and gas reserves, will add to its oil stabilization fund if crude prices remain over $65 in the coming 12 months, the deputy central bank governor said. “As long as the price of petroleum is over $65 per barrel Iran will gain extra petroleum revenue, which will find its way into the oil stabilization fund,” Hossein Ghazavi said in a phone interview from Tehran late yesterday. He declined to comment on the current balance of the fund, which is aimed at providing protection for the economy should oil prices slide. The oil fund “is essential, as it is a rainy-day fund but it is also a very politicized one, as the president has used the money for his own political purposes,” said Mohammed Shakeel, an economist who covers Iran for the Economist Intelligence Unit in London. Oil accounts for more than 80 percent of the government’s revenue, Shakheel said. Rising prices have helped the central bank increase its foreign currency reserves. Iran’s reserves have surpassed $100 billion, Ghazavi said in an Oct. 13 interview, declining to provide a more specific figure.
• CBOE Files to Raise as Much as $300 Million in IPO.
• GMAC Executive Pay Packages Questioned by TARP Panel. GMAC Inc., the auto and home lender rescued by the U.S. government, may have overpaid its top executives after receiving taxpayer funds, according to a report by the panel overseeing the Troubled Asset Relief Program. Pay packages for executives at GMAC and other TARP recipients “raise significant questions, which the panel will continue to study,” the Congressional Oversight Panel said in a report released today. “These include whether particular levels of compensation are either necessary or appropriate.” GMAC, the primary lender to General Motors Co. and Chrysler Group LLC car dealers, is subject to the panel’s scrutiny after receiving three government bailouts totaling $17.3 billion starting in 2008. The Detroit-based company is now 56.3 percent owned by U.S. taxpayers.
• U.S. Household Worth Rose at Slower Pace Last Quarter. Household wealth in the U.S. grew in the fourth quarter at a slower pace, limited by a drop in home values that indicates the recovery in consumer spending will take time to gain speed. Net worth for households and non-profit groups rose by $700 billion to $54.2 trillion, marking a third consecutive gain, according to the Federal Reserve’s Flow of Funds report issued today in Washington. Wealth increased by $2.78 trillion in the third quarter.
• Obama's $79 Billion Tech Plan May Favor Web Programs. Vivek Kundra, the Obama official with $79 billion to spend on technology, said the government can be more efficient by putting programs on the Web, paving the way for companies like Microsoft Corp.(MSFT) and Google Inc.(GOOG) to win business. The government wants to put data such as health-care pricing information on Internet-based systems as they grow more secure, the U.S. chief information officer said in an interview this week.

Wall Street Journal:

• Rattner in Talks to Settle a Probe. Pension-Fund Official's Guilty Plea Puts Spotlight on the Former Auto Czar. Wall Street financier and former auto czar Steven Rattner is in settlement talks to resolve his role in the "pay to play" investigation at the New York state pension fund, according to people familiar with the matter. A guilty plea on Wednesday by David Loglisci, the former chief investment officer of the $129 billion fund, turned a spotlight on Mr. Rattner, a well-known Wall Street player who last year spearheaded the Obama administration's auto overhaul. On a call with reporters, New York Attorney General Andrew Cuomo said the 57-year-old Mr. Rattner remained under investigation but declined to provide more details. For months, Mr. Rattner's lawyers have been engaged in protracted settlement discussions with both the New York attorney general and the Securities and Exchange Commission over his conduct in the case, said the people familiar with the matter. Mr. Rattner left Quadrangle a year ago to join the Obama administration. He is working on a book about the experience of restructuring the industry in a matter of months.
• Google(GOOG) Gains Traction In Display-Ad Push. Google Inc. is signing up marketers to use its latest display-advertising technology, pressuring rival Yahoo Inc. and advancing the search giant's effort to change the way ads are sold across the Internet. Google is championing a new stock market-like system for buying display ads. Using its exchange, ad buyers and sellers are matched to ad spaces in a real-time auction. Ad buyers calculate how much they are willing to pay for a particular ad position on the fly, based on how likely the ad is to be seen by the types of viewers they are targeting. Google released its new technology, called the DoubleClick Ad Exchange, in September. Yahoo has run its own exchange, called Right Media, for years, but has only recently begun to roll out real-time bidding. "Google has more firepower right now," said Matt Spiegel, chief executive of Omnicom Group's digital ad buying unit OMG Digital. "I'm convinced that the other key players in the space recognize the risk."
• Greek Borrowing Costs Imperil Budget Plans. The high interest rates Greece must pay to borrow money are threatening the county's ambitions to cut its deficit, raising again the specter it may need external aid. Many in Europe breathed a sigh of relief last week when Greece successfully sold €5 billion ($6.85 billion) in government bonds in an auction that saw investors clamoring for the debt. The sale was seen as a key test: The country needs to borrow about €54 billion this year. But debt buyers are demanding higher premiums than officials in Athens anticipated when they planned the 2010 budget.
• Hedge Fund Law Coming to a Head. Most of the focus at the meetings next week of European finance ministers will be on Greece. But there is another issue which is coming to a head: the Alternative Investment Fund Managers directive. This is the proposed European law that will govern the managers of hedge funds, private equity and venture capital funds in Europe. It’s being discussed this morning by the European Union ambassadors. If they agree it’s ready, the proposal will move on to the finance ministers meeting next Tuesday. The proposed law is meant to have three objectives: investor protection; control of risks to the financial system and transparency of the operations of fund managers. The latest text from the Spanish presidency that the ambassadors are discussing is here.

Barron's:

• 4 Biotech Takeout Targets. Astellas Pharma's (ticker: ALPMY) surprise $3.5 billion offer last week for OSI Pharmaceuticals (OSIP) marks the Japanese drug maker's second hostile attempt to buy a U.S. company. The bid also signals a return to the days of industry goliaths feeding on small and midsized drug makers. That could eventually lead to bids for companies such as Dendreon (DNDN), Allos Therapeutics (ALTH), Alexion Pharmaceuticals (ALXN) and Auxilium Pharmaceuticals (AUXL), and a big payoff for their shareholders.

CNBC:

• Whitman Proposes Cuts to Spending, Taxes for California.
• Citigroup(C) Sees Return to Sustained Profitability.
  

The Business Insider:

• Gartman: Here's Why Europe Is About To Dump Lots of Gold Onto The Market.
• You Won't Believe How Much China Needs To Tighten To Stem Inflation.
  

NJ.com:

• Officials Urge Illegal Immigrants to Cooperate in U.S. Census to Benefit N.J. The irony is rich. In many contexts, much of the time, immigrants without proper papers are demonized as men and women — and children — who cause problems for properly documented citizens. But, at least for the next few months, they will be the darlings of government, urged to come out of hiding and anonymity, coaxed to put away their fears of separation from family, arrest, imprisonment in immigration jails and deportation. Because, after all, they have to be counted in the 2010 Census. They have to be counted so New Jersey can get more money for education, health care, transportation and other services. And maintain its current number of Congressional representatives. Dressel joined a number of local, county, state and federal officials the other day for what had all the appearances of a political rally in Perth Amboy. But the point of the rally wasn’t to get out the vote for a candidate, but to find the uncounted, especially among those who might be afraid to be counted. At stake is how $400 billion in federal formula-based aid is distributed. At stake also is how many members of Congress are allotted to each state. Wilda Diaz, Perth Amboy’s mayor and a champion of counting the uncounted, says ICE should consider a moratorium on the raids during the decennial census. "We have to allay their fears," she says.

Business Wire:

• Fitch Solutions: U.S. Subprime Prices Switch Gears, Up Over 6%. U.S. subprime RMBS prices reversed course this past month, with most vintages increasing in value, according to Fitch Solutions in its latest CDS of RMBS indices results. Fitch Solutions' U.S. Subprime RMBS Total Market Price Index increased by just over 6% month on month to 7.63 as of March 1 (up from 7.17 at Feb. 1). All vintages increased in value, with the 2006 vintage performance the strongest with a 17% increase. Additionally, the 2005 and 2004 vintages increased by 9% and 3% respectively, month on month. The lone outlier was the 2007 vintage, which declined by 2% hitting its lowest ever value at 2.06. Recent loan level analysis conducted by Fitch Solutions on the indices' constituents found that declines in both the Constant Prepayment Rate (CPR) and Constant Default Rate (CDR) drove the rise in value for the 2006 vintage. Three-month CPR fell to 1.8% from 2.4%, while the three-month CDR declined from 26.3% to 25.7%. Historical 60-day delinquencies also decreased from 1.77% to 1.65%.

Washington Times:

• Bush's Union Transparency Rules Retracted Under Obama. The Obama administration promised increased transparency in government but has rolled back rules proposed by the Bush administration that expanded the financial disclosure statements required of labor unions and their leaders. Since President Obama took office, the Labor Department has rescinded or delayed three sets of rules proposed by the George W. Bush administration that would have required unions and their leaders to more specifically detail their finances, according to a review of records by The Washington Times. The rules were rolled back while the Obama administration was seeking more stringent regulation of corporate America, including banks, insurance companies, health care providers and publicly traded companies. The proposed Bush rules would have required labor unions to identify from whom they were buying and selling assets, forced union leaders and employees to file more detailed conflict-of-interest forms, and required unions to reveal the finances of hundreds of so-called labor trusts - largely unregulated entities set up to provide benefits for members. Former Labor Secretary Elaine L. Chao, one of the architects of the expanded Bush rules, said the Obama administration is "making a mockery of the regulations" and is giving "preferential treatment" to the unions. "This administration is not enforcing laws on union transparency and democracy," Ms. Chao told The Times. "They are telling unions that they don't have to comply."

Rasmussen:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -18 (see trends).

Politico:

• Chris Dodd Goes Forward Without GOP. Senate Banking Chairman Chris Dodd, concerned that bipartisan talks are losing momentum, will unveil his own financial reform bill Monday without the full support of his Republican negotiating partners. Corker blamed the Obama administration’s approach on health care for pushing Dodd to move ahead with his own bill next week. “There’s no question that White House politics and health care have kept us from getting to the goal line,” Corker said in a news conference Thursday, saying Dodd told him Wednesday he felt he needed to get a financial reform bill out of the banking committee before the Senate uses the procedural tactic known as reconciliation to push health care through the chamber by a majority vote. “The elephant in the room is reconciliation and trying to get a bill out of committee before that time… . He is a victim of health care policy,” Corker said of Dodd. Some Democrats scoffed at Corker blaming reconciliation. “God bless Bob Corker. We appreciate all the help he gave us but at some point we just can't wait,” said Sen. Dick Durbin (D-Ill.) “Senator Baucus spent 61 different meetings with Republicans trying to get something on health care. There reaches a point where you have to accept the inevitable.”

Real Clear Politics:

• China's Bubble Trouble. The bubbly enthusiasm that many analysts express about the Chinese economy reminds me of the old-time variety show host Lawrence Welk, who banished worries each week with soothing sounds from his "Champagne Music Makers." China watchers should turn off the music and listen to Premier Wen Jiabao, who has been surprisingly frank in warning that overinvestment and lack of domestic demand are producing an economic bubble in his country.

Reuters:

• More Americans Say Global Warming Exaggerated: Poll. A growing number of Americans, nearly half the country, think global warming worries are exaggerated, as more people also doubt that scientific warnings of severe environmental fallout will ever occur, according to a new Gallup poll. The new doubts come as President Barack Obama is pressuring the Congress to produce legislation significantly cutting smokestack emissions of carbon dioxide and other greenhouse gases blamed for climate change problems. With congressional elections less than eight months away, many lawmakers are hesitant to take on a controversial energy and environment bill, especially if voter interest is waning. The result comes on the heels of well-publicized reports that some of the details of scientific findings that went into international global warming reports were either flawed or exaggerated. The United States has made a non-binding pledge to the world to seek a 17 percent reduction in carbon emissions by 2020, from 2005 levels, mostly by switching to more expensive alternative energy, such as wind and solar power.
• Exxon Mobil(XOM) Boosts 2010 Capital Spending 4%.
• U.S. Commercial Paper Market Rises in Week.
  

Financial Times:

• Push For Clearing Houses Fails to Move Oil Traders. Big oil traders are choosing to keep more derivatives deals private, in spite of a global regulatory campaign to steer such contracts to clearing houses. Their willingness to take on risks viewed as intolerable just a year ago reflects renewed faith in the strength of their trading counterparties, but also highlights a preference for opaque markets without a nudge from regulators. Regulators in the US and Europe want most derivatives trades to be settled and guaranteed by clearing houses.

Handelsblatt:

• German energy consumption fell by 6% in 2009, the lowest since the start of the 1970s, as the economic slump prompted companies using a lot of energy to cut back power use, citing the Association for Energy Balance.

Bear Radar

Style Underperformer:
Large-Cap Growth (-.25%)

Sector Underperformers:
Semis (-1.68%), Homebuilders (-1.12%) and Agriculture (-1.02%)

Stocks Falling on Unusual Volume:
ITMN, CMC, FCS, VIP, SKIL, WMGI, HRBN, AONE, EWBC, WG, CNK, BLT, MW and ACC

Stocks With Unusual Put Option Activity:
1) SLM 2) FRE 3) AMLN 4) TRA 5) HBAN

Bull Radar

Style Outperformer:
Large-Cap Growth (-.05%)

Sector Outperformers:
Networking (+.90%), Computer Services (+.80%) and Road&Rail (+.70%)

Stocks Rising on Unusual Volume:
ARGN, CSX, PRA, IBM, MBLX, HOLX, HITK, SEED, IMAX, GYMB, GEOY, CLNE, SMTC, VECO, ELMG, APWR, KIRK, HELE, DWSN, CIEN, OGXI, FSYS, CAKE, NTRI, GOOG, KUB, LUX, AIG, PVH and GME

Stocks With Unusual Call Option Activity:
1) HOLX 2) GME 3) AES 4) PCAR 5) VECO

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Thursday Watch

Evening Headlines
Bloomberg:

• Naked Swaps Crackdown in Europe Rings Hollow Without Washington. European politicians and regulators could initiate a continent-wide ban on speculative trading of sovereign credit-default swaps tomorrow. Making it stick without the Americans won’t work. “You need to get the U.S. on board, otherwise the effect will be minimal because trading will simply move elsewhere,” said Jan Hagen, head of the financial services group at the European School of Management and Technology in Berlin. “A ban would allow European politicians to tell voters at least they’re doing something.” “My own sense is that banning naked swaps is not necessary and wouldn’t help fundamentally,” Geithner told lawmakers on March 26, 2009. “It’s too hard to distinguish what is a legitimate hedge that has some economic value from what people might just feel is a speculative bet on some future outcome.” While the U.S. Congress is discussing legislation that would require some derivatives be backed by clearinghouses and traded on regulated platforms, talk about banning naked credit- default swaps has fizzled.
  
• Greeks Brace for Protests, National Strike Over Budget Cuts. Greece’s unions will shut down hospitals, airports and schools today in the country’s second general strike this year to protest Prime Minister George Papandreou’s latest round of budget cuts to curb the European Union’s biggest deficit. An air-traffic controllers’ walkout will force the cancellation of flights, including 479 from Athens International Airport, the country’s largest. Bus and subway drivers, doctors, power workers, journalists and teachers will stop work to protest 4.8 billion euros ($6.5 billion) of wage cuts and tax increases that have been praised by investors and the European Union. Policemen and firemen will don their uniforms to join a march to parliament.
• U.S. Governors Urge Congress to Stop EPA Carbon Rules. A group of mostly Republican U.S. governors today urged federal lawmakers to stop the Obama administration from regulating greenhouse gases under an existing law. The U.S. Environmental Protection Agency “is not equipped to consider the very real potential for economic harm when regulating emissions,” the 20 governors, including Republican Haley Barbour of Mississippi and Democrat Joe Manchin of West Virginia, said in a letter to House and Senate leaders. Instead of EPA regulations, Congress should “pass comprehensive legislation that balances the role of conservation and climate security with the production of abundant and affordable American energy,” the governors said in the letter. In 2007, the Supreme Court ruled that the EPA has the authority to regulate carbon dioxide and other greenhouse gases that scientists have linked to climate change. Legislation that would replace direct EPA regulation with a cap-and-trade system allowing companies to buy and sell the right to pollute is stalled in Congress. While the Obama administration supports the cap-and-trade legislation, it plans to regulate cars, trucks, power plants, oil refineries and other industrial sources of pollution under the existing Clean Air Act if the carbon trading bill doesn’t pass Congress this year. Republicans and some Democrats in Congress are trying to delay the EPA’s proposed carbon regulations or strip the agency of its authority over greenhouse gases. EPA regulation “will be costly to consumers and could be devastating to the economy and jobs,” the governors said in the letter, which doesn’t endorse the cap-and-trade legislation.
• Connecticut Sues Moody's(MCO), S&P Over Subprime Ratings. Connecticut Attorney General Richard Blumenthal said he is suing Moody’s Corp. and Standard & Poor’s because they were “catering to the investment banks and other issuers” of structured debt securities. “The rating agencies said they were objective and independent, knowing that they were heavily influenced by their bank clients,” Blumenthal said in a Bloomberg Television interview today.
• World Currency Trade Rises 17% to $2.7 Trillion a Day. Global currency trading rose to $2.7 trillion a day between April and October, the first growth since the six months to April 2008, the Reserve Bank of Australia said, citing data from five markets. Transactions increased by 17 percent from the previous six months, the RBA said in a report based on figures from Australia, the U.S., U.K., Canada and Singapore. These markets account for more than 60 percent of world currency trading, the RBA said.
• BP(BP) Said to Be in Talks for Devon(DVN) Assets in $5 Billion Deal. BP Plc, Europe’s largest oil and gas company, is in talks to buy Devon Energy Corp.’s Brazilian and Gulf of Mexico oil assets in a transaction valued at more than $5 billion, according to a person familiar with the deal.
• China Inflation, Industrial Production Accelerate. China’s inflation reached a 16- month high, industrial output climbed and new loans exceeded forecasts, adding to the case for the government to pare back stimulus measures.

Wall Street Journal:

• Pelosi's Office Knew of Massa Concerns in October. Former Rep. Eric Massa's chief of staff informed an aide to House Speaker Nancy Pelosi in October about concerns relating to Mr. Massa's conduct toward his staff, a senior Democratic leadership aide said Wednesday. Mr. Massa's top aide said the former congressman was living with some of his congressional aides and that he had used "strong" language that made them feel uncomfortable, the leadership aide said. Last week, Mrs. Pelosi indicated her staff had learned of concerns about Mr. Massa only in February, when more detailed allegations of sexual harassment were brought to the office of House Majority Leader Steny Hoyer (D., Md.).
• Wall Street Mobilizes to Shape Look of CDS Rules. Investors expressed frustration and anger Wednesday after reports that U.S. and European governments were eager to place new curbs on the use of credit-default swaps. But some on Wall Street acknowledged that changes to the arcane trading area are inevitable, with some suggesting remedies that might increase transparency while forestalling greater government intervention. Wednesday, European officials appeared to soften some of their previous statements calling for rules on the swaps, including a possible ban on using them for "speculative" trading.
• Can Nancy Pelosi Get the Votes? The Senate bill's abortion language is not the House Speaker's only problem. Are there enough votes in the House to pass the Senate's health-care bill? As of today, it's clear there aren't. House Democratic leaders have brushed aside White House calls to bring the bill forward by March 18, when President Barack Obama heads to Asia. Nevertheless, analysts close to the Democratic leadership tell me they're confident the leadership will find some way to squeeze out the 216 votes needed for a majority. Speaker Nancy Pelosi has indeed shown mastery at amassing majorities. But it's hard to see how she'll do so on this one. The arithmetic as I see it doesn't add up.

BusinessWeek.com:

• Software Industry Loses Patience with China. The Business Software Alliance complains to Washington about Beijing's policies.

CNBC:

• Are Hedge Funds Bailing Out of Gold? Hedge funds were buyers of Citi when the stock was at a buck. So what is the smart money doing now? For insights we turned to Anthony Scaramucci, managing partner at Skybridge Capital. Scaramucci says the play right now is short gold. You read that right – short gold. Here’s his thesis: "I don’t think inflation will hit the nation without real wage growth," explains Scaramucci. And we're not seeing wage growth." "Also we’ve got excess global capacity in manufacturing," he adds. Ultimately, I expect gold to disappoint.
• Senate Passes $149 Billion Bill for Jobless Aid, Tax Breaks. The U.S. Senate Wednesday approved a $149 billion package of jobless aid and tax breaks as Democrats continued efforts to bring down the 9.7 percent unemployment rate before the November congressional elections.

NY Times:

• Goldman(GS) Deal-Maker Now Advocates Regulation. For 18 years, Gary G. Gensler worked on Wall Street, striking merger deals at the venerable Goldman Sachs. Then in the late 1990s, he moved to the Treasury Department, joining a Washington establishment that celebrated the power of markets and fought off regulation at almost every turn. Today, he is emerging as one of the nation’s archreformers, pushing to impose some of the most stringent new financial regulations in history. And as the head of the Commodity Futures Trading Commission, the leading contender to oversee the complex derivatives contracts that played a central role in the financial crisis and, in turn, the Great Recession, he is in a position to influence the outcome.

Business Insider:

• Chinese PPI Running At Red-Hot 5.4%. Has the PBOC already blown it?
• The Mindblowing Bubble In The "Miami Of China." In this chart from Waverly Advisors -- they are going parabolic even by China standards.

Forbes:

• Billionaires' Bad Bets. Investments that soured in 2009 for finance titans.
• The World's Billionaires. For the third time in three years, the world has a new richest man.
  

Pensions & Investments:

• Hedge Fund Closings Surpass Debuts for 2nd Straight Year. For the second straight year, more hedge funds closed than were launched in 2009, according to data released today by Hedge Fund Research. Last year, 1,023 hedge funds closed, compared to 784 that started. In 2008, 1,471 funds closed while 659 were launched, according to HFR’s March hedge fund report, which provided analysis of the hedge fund researcher’s year-end 2009 data. HFR’s analysis also showed that the average single manager’s hedge fund performance fee fell to 19.2% as of Dec. 31, compared to 19.31% as of March 31, 2008, before the financial crisis started. The average hedge fund-of-funds manager’s performance fee fell to 6.9% as of year-end 2009, compared to 8.05% in the first quarter 2008. Further, HFR reported that the average incentive fee for hedge funds started in 2009 was 17.6%, 1.6 percentage points below the average.

Rasmussen Reports:

• 25% Say U.S. Heading In Right Direction. For the second straight week, just 25% of U.S. voters say the country is heading in the right direction, according to the latest Rasmussen Reports national telephone survey. Last week’s finding marked the lowest level of voter confidence since just before President Obama took office in January 2009. A sizable majority (71%) believe the nation is heading down the wrong track, the highest level of pessimism measured in 14 months.

Politico:

• Holder Under Fire For Padilla Brief. Conservative critics of Attorney General Eric Holder’s handling of accused terrorists found a new issue on which to criticize him Wednesday – an amicus brief Holder signed on to urging the Supreme Court in 2004 to reject the Bush administration’s attempt to try Jose Padilla as an enemy combatant. Two former Bush administration officials said the brief’s acknowledgement that accused terrorists could go free if their cases were heard through the normal judicial process contradicted Holder’s public statements justifying the FBI’s reading Umar Farouk Abdulmutallab, the alleged underwear bomber, his Miranda rights. They also pointed out that Holder had not called the brief to the attention of the Senate Judiciary Committee during his confirmation hearings.
• Nancy Pelosi: 'We're going to get started'. House Speaker Nancy Pelosi (D-Calif.) will start walking her members through major components of the final health care package Thursday as Democrats inch ever closer to a climatic vote on the landmark legislation. “We’re going to get started,” Pelosi said as she left the Capitol Wednesday night. "We have some questions ... but we're hoping that we'll get those answered over the course of the reading. It's not much."
• GOP Backs Broad Earmarks Ban. Republican leaders in the House officially backed a one-year moratorium on earmarks, upstaging Democrats who instituted a more limited ban today. It is also a clear signal that the Republican Conference is likely to not request earmarks in 2011 spending bills. A joint statement from Republican leaders Wednesday evening said that “the earmark process in Congress has become a symbol of a broken Washington. We believe the time has come for House Republicans to adopt an immediate, unilateral moratorium on all earmarks.”

USA Today:

• Unemployment Rises in 30 States in January. Unemployment rose in 30 states in January, the Labor Department said Wednesday, evidence that jobs remain scarce in most regions of the country. Five states reported record-high joblessness in January: California, at 12.5%; South Carolina, 12.6%; Florida, 11.9%; North Carolina, 11.1%; and Georgia, 10.4%. Michigan's unemployment rate is still the nation's highest, at 14.3%, followed by Nevada, with 13% and Rhode Island at 12.7%. South Carolina and California round out the top five.

Reuters:

• Film Futures Markets to Launch Soon. If start-up Media Derivatives and broker dealer Cantor Fitzgerald have their way, investors may soon be able to place bets on the box office showing of summer blockbuster "Iron Man 2." Media Derivatives, a division of Veriana Networks, and Cantor are racing to set up the first U.S. exchanges to offer futures on movie box office receipts.
• U.S. Oil Industry Braces for Carbon Rules. As oil and natural gas prices settle into an equilibrium for now, a new variable is emerging as the most worrisome for Big Oil: the cost of carbon. Major international oil companies say they are factoring carbon prices into their long-term planning calculations, but assessing that cost is a challenge as U.S. policymakers struggle to come together on how to combat climate change. The legislation could recast the playing field for energy producers and place a premium on low-carbon energy sources like wind and solar. "Climate change regulations must be treated like business risk on par with other risks in this business," said Helge Lund, chief executive of Norway's Statoil, speaking at the CERA Week conference. "The pressure in this industry only will increase."
• Shale Gas Could Supply 100 Years of Consumption. The natural gas shale boom in North America has more than doubled discovered gas resources and can supply more than a century of consumption at current rates, an IHS CERA study released Wednesday said. As recently as 2007, it was widely thought that natural gas was in tight supply and the U.S. would need to import gas, said Daniel Yergin, chairman of IHS CERA. But a long-lasting "shale gale" has squashed that outlook, he said at the annual CERAWeek conference in Houston.

Financial Times:

• Geithner Warns of Rift Over Regulation. Tim Geithner, US Treasury secretary, has delivered a blunt warning to the European Commission that its plans to regulate the hedge fund and private equity industries could cause a transatlantic rift by discriminating against US groups. A letter sent by Mr Geithner this month to Michel Barnier, Europe’s internal market commissioner, makes it clear that the European Union is heading for a clash with Washington if it pushes ahead with what the US – and Britain – fear could be a protectionist law. The debate over the shape of future financial regulation has reached a critical point in Brussels. Diplomats were on Wednesday night moving closer to a compromise on the sweeping overhaul that has angered the industry and worried institutional investors. The draft EU directive would impose tighter restrictions on hedge funds, private equity and other alternative investment funds. It has caused alarm in the City of London, where some in the industry say it is a thinly veiled attempt by France and Germany to undermine the UK’s dominance of financial services. If European diplomats reach agreement at a meeting on Thursday, the directive will be put to EU finance ministers when they convene on Tuesday. The proposed rules will require approval by EU lawmakers.
• How to Handle the Sovereign Debt Explosion by Mohamed El-Erian. Our sense is that the importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood. Yet, with time, it will prove to be highly consequential. The sooner this is recognized, the greater the probability of being able to stay ahead of the disruptions rather than be hurt by them.
• Pandit Sees Revival of Citi's(C) Fortunes. Vikram Pandit, Citigroup’s chief executive, will on Thursday raise the prospect of the US bank earning as much as $20bn from its core business within a few years, a big increase from current levels that would mark a sharp revival in Citi’s fortunes. Mr Pandit’s move – to be made as he details Citi’s strategy to investors – is a bold attempt to shift financial markets’ attention away from Citi’s huge losses and repeated government bail-outs during the crisis. But it will also raise the stakes over Mr Pandit’s tenure at the helm of the financial group by linking his future to the success of the strategy and financial performance. People close to the situation said Mr Pandit would not give a specific profit target for Citicorp, the wholesale and retail banking operations that will remain part of the company once it sheds some $500bn-plus in unwanted assets and businesses. However, the Citi chief is expected to walk investors through Citicorp’s earnings potential as the company focuses on its unrivalled reach across the global economy. Mr Pandit will estimate that Citicorp could earn a yearly return of 1.25 per cent or more on its assets. The unit had assets of more than $1,300bn at the end of 2009, but Citi executives estimate the assets will increase by about 5 per cent a year. On that basis, Citicorp could earn about $20bn by the end of 2012. Citicorp, which includes the commercial, investment and retail banks and the cash management business, had net income of $14.7bn in 2009, although Citigroup recorded a loss of $8.7bn due to its struggling non-core businesses. Mr Pandit told the Financial Times he wanted Citi to harness its presence in more than 100 countries to serve clients ranging from large companies and governments to wealthy savers. “Clients look to us as being the financial conduit to the world,” he said. “We want to be a global bank for institutions and individuals.” Citi’s international focus may upset some US politicians because the government bailed out the company and still owns a 27 per cent stake, but Mr Pandit regards it as the bank’s biggest competitive advantage. Mr Pandit did not comment on the government’s stake ahead of next week’s expiry of a lock-up period but officials have indicated that they will try to sell it over the next few months.
• Fears of China Property Bubble Grow.
  

Telegraph:

• France Vows Retaliation Against US in Air Tanker Dispute. France has vowed to retaliate against the United States for allegedly shutting Europe's aviation giant EADS out of a $50bn (£33.4bn) defence contract, warning of potential damage to the Atlantic alliance. "This is a serious affair," said France's Europe minister Pierre Lellouche. "I can assure you that there will be consequences." "You cannot expect Europeans to contribute to global defence if you deny their industries the right to work on both sides of the Atlantic," he said, adding that French president Nicolas Sarkozy would take action "at the appropriate time".

TimesOnline:

• Google(GOOG) Looks at Clouds from Both Sides Now. Google is broadening its assault on Microsoft’s(MSFT) dominance of business software by launching an online marketplace for other companies’ products. The internet search giant wants companies to use applications piped over the internet, posing a direct challenge to Microsoft’s model of selling licences for its Windows operating system and software programs such as Office, Google began to offer a free online suite of e-mail, word processing, spreadsheet and calendar applications in 2006. It has been selling a more sophisticated package of online services for $50 (£33) per user for the past three years. It says that about 25 million people working for more than two million businesses, government agencies and schools use Google’s online applications. About 500 million people use Microsoft’s Office. Google is offering to sell the programs of other software makers in an effort to fill its own product gaps and to persuade more companies to convert to “cloud computing” — the idea of running applications in web browsers instead of installing them on individual hard drives. More than 50 software makers have agreed to sell their programmes through Google, which will keep 20 per cent of the sales. The prices are expected to range from $50 annually to several hundred dollars annually per user.

La Tribune:

• France, Germany, Greece and Eurogroup President Jean-Claude Juncker wrote a joint letter to the European Commission calling for a probe into recent credit default swaps activity. The governments want European Commission President Jose Manuel Barroso to investigate trading in recent months related to Greek debt in particular and to impose tougher regulation if there are any indications of market manipulation.

Evening Recommendations
Citigroup:

• Upgraded (AYR) to Buy, target $12.
• Reiterated Buy on (PLCE), target $50.
• Reiterated Buy on (AEO), target $22.
• Reiterated Buy on (VECO), raised estimates, boosted target to $52.
  

Night Trading

• Asian indices are -.50% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 93.0 -6.0 basis points.
• S&P 500 futures -.45%
• NASDAQ 100 futures -.40%

Morning Preview

• BNO Breaking Global News of Note
• Google Top Stories
• Bloomberg Breaking News
• Yahoo Most Popular Business Stories
• MarketWatch News Viewer
• Asian Financial News
• European Financial News
• Latin American Financial News
• MarketWatch Pre-Market Commentary
• U.S. Equity Preview
• TradeTheNews Morning Report(9:30 am EST)
• Briefing.com In Play
• SeekingAlpha Market Currents
  
• Briefing.com Bond Ticker
• CNN US AM Market Call
• NASDAQ 100 Pre-Market Indicator/Heat Map
• Pre-Market Stock Quote/Chart
• WSJ International Market Performance
• Commodities Futures
  
• IBD New America
• Economic Preview/Calendar
  
• Earnings Calendar
• Conference Calendar
• Who's Speaking?
• Upgrades/Downgrades
• Politico Headlines
• Rasmussen Reports Polling

Earnings of Note
Company/Estimate

• (BKE)/.84
• (JW/A)/.74
• (PNY)/1.11
• (JTX)/.48
• (SFD)/.19
• (ZQK)/-.13
• (NSM)/.18
• (PSUN)/-.29
• (PLL)/.47
• (ARO)/.95

Economic Releases
8:30 am EST

• The Trade Deficit for January is estimated to widen to -$41.0B versus -$40.2B in December.
• Initial Jobless Claims for last week are estimated to fall to 460K versus 469K the prior week.
• Continuing Claims are estimated at 4500K versus 4500K prior.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Dudley speaking, Treasury's $13B 30-Year Note Auction, weekly EIA natural gas inventory report, (XOM) analyst meeting, (IT) investor day, (V) investor day, (CERN) investor meeting, BofA/Merrill Consumer Conference, UBS Engineering/Construction Conference, Morgan Stanley Utilities Conference, CSFB Communication/Networking Equipment Conference, Cowen Healthcare Conference and the Citi Financial Services Conference could also impact trading today.

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