Tuesday Watch

Evening Headlines
Bloomberg:

• EU Lays Groundwork for Greek Lifeline to Shore Up Scarred Euro. European finance ministers laid the groundwork for a financial lifeline to debt-stricken Greece, breaking a taboo against aid to cash-strapped governments in order to avert a crisis for the euro. Officials from the 16 countries using the currency worked out a strategy for emergency loans in case Greece’s plan for 4.8 billion euros ($6.6 billion) in tax increases and wage cuts fails to stave off fiscal disaster. “We clarified the technical arrangements that would enable us to take coordinated action which could be swiftly put into place in the event it is necessary,” Luxembourg Prime Minister Jean-Claude Juncker told reporters late yesterday after leading a meeting of euro-area finance officials in Brussels. With the euro undergoing the harshest test in its 11-year history, the unprecedented pledge reflected concern that Greece’s budget woes could spread, poisoning investor confidence and aggravating the currency’s 10 percent decline against the dollar since November. The meetings continue at 9 a.m. today with all 27 EU finance ministers. Also on the agenda are proposals to clamp down on hedge funds and credit-default swaps.
• Dodd Eases Exclusion of Swaps Set to Be Cleared. Senator Christopher Dodd’s draft legislation to regulate the $605 trillion private swaps market makes it easier to exclude trades from being processed by clearinghouses, compared with his plan released in November. Dodd’s bill no longer requires federal regulators to agree that excluding a swap from being cleared “is necessary and appropriate for the reduction of systemic risk.” That stricter requirement was in the draft bill Dodd, a Democrat from Connecticut and chairman of the Senate Banking Committee, released in November.
• Israel Will Build in All of Jerusalem, Netanyahu Says. Israeli Prime Minister Benjamin Netanyahu defended construction of Jewish neighborhoods in east Jerusalem, escalating a clash with the Obama administration that threatens to derail renewal of Middle East peace talks. “Over the past 40 years, no Israeli government has agreed to limit building in Jerusalem,” Netanyahu said today in a speech to Parliament, ticking off five sections of the city that were captured from Jordan in the 1967 war and now house tens of thousands of Israelis.
• Mexico Killings Point to Risks of U.S. Cooperation in Drug War. The killing of three people connected with the U.S. consulate in Ciudad Juarez over the weekend shows that U.S. cooperation in Mexico’s fight against drug cartels has made U.S. government employees targets of the traffickers, said a senior policy director of the Council of the Americas. U.S. diplomats may negotiate a greater presence for their own law enforcement officials in Mexico to protect government employees after the March 13 deaths, said Christopher Sabatini of the council. While it’s unclear whether the shootings imply a greater risk for U.S. civilians, the violence does put another dent in Mexico’s tourism industry, he said.
• Brokers Press Regulators to End Big Banks' Dominance in Swaps. MF Global Holdings Ltd.(MF), Hexagon Securities LLC and at least 19 other financial firms are pressing regulators to force swaps clearinghouses to lower entry barriers in order to improve competition in a $605 trillion derivatives market dominated by the world’s biggest banks. Brokers formed an association last month that hired a Washington-based law firm to pursue the issue with lawmakers and regulators, said Mike Hisler, a partner at New York-based Hexagon. They also seek tougher conflict-of-interest laws to ensure that a bank’s derivatives desk doesn’t influence clearinghouse decisions that could shut out new competitors.
• Rio Olympics at Risk From Oil Bill, Committee Says. A proposed cut in Rio de Janeiro’s share of Brazil’s oil royalties will leave the state unable to carry out infrastructure projects tied to the 2016 Olympics, the president of Rio’s organizing committee said in a statement. Brazil’s Lower House approved a bill March 10 that would give cities and states that don’t produce oil a bigger stake of the revenue from crude production. Oil-rich states such as Rio de Janeiro and Espirito Santo would receive lower royalties. The measure now goes to the Senate for a committee vote.
• Dolby(DLB) Cuts Price of 3-D Glasses to $17 From $27.50. Dolby Laboratories Inc., aiming to entice more movie theaters to use its 3-D video technology, cut the price of its 3-D glasses to $17 from $27.50. Theaters can start buying glasses at the new price starting today, San Francisco-based Dolby said in a statement. The company also began offering cheaper prices for bundles of as many as 1,000 pairs.
• Golf's Masters Tournament to Be Broadcast in 3-D TV.
• CLOs to End 12-Month Drought in Citigroup(C) Deal: Credit Markets. The market for collateralized debt obligations backed by high-yield, high-risk loans is poised to reopen in the U.S. for the first time in a year after losses on mortgages prompted investors to flee bundled securities. Citigroup Inc. is underwriting a $500 million fund managed by New York-based WCAS Fraser Sullivan Investment Management LLC, scheduled to price as soon as this week, according to people familiar with the offering, who declined to be identified because terms are private. The deal refinances an existing collateralized loan obligation and increases its size by more than 50 percent. The offering would mark the first new issue backed by widely syndicated loans in the $440 billion market for CLOs since last March and a return to investments that contributed to $1.76 trillion of writedowns and credit losses at the world’s largest financial institutions.
• Saudi Oil Minister Sees No Need to Alter OPEC Production Now. Saudi Arabia, the biggest and most influential member of the Organization of Petroleum Exporting Countries, said oil prices are in the right range and there’s no need to change production policy. “We are extremely happy with the market, the economy is doing well, it will do better down the road, so I don’t see any reason to disturb this happy situation,” Saudi Oil Minister Ali Al-Naimi said late yesterday in Vienna, where OPEC meets tomorrow. “The price has stayed very well in the range of $70 to $80. It is in a very happy situation.”

Wall Street Journal:

• Wal-Mart(WMT) to Expand Its Financial Services. Wal-Mart Stores Inc., years after a failed effort to obtain a bank charter, plans a 50% increase this year in the number of the company's stores offering bank-like services. The expansion would push the number of Wal-Marts with "Money Centers" to 1,500, or a little less than one for every two Wal-Marts in the U.S., giving the nation's biggest retailer a financial presence that only a handful of banks have. Wal-Mart plans to open its 1,000th money center Tuesday. The money centers cater to millions of the retailer's lower-income customers who don't have a bank account or significant relationships with a bank. The federal government estimates that the category accounts for one in four U.S. households.
• Pioneering Fund Stages Second Act. The founder of Renaissance Technologies LLC, one of the most successful hedge-fund companies ever, is trying to pull off a feat few other investment impresarios have managed: passing the torch. James Simons, the secretive mathematician and Cold War code breaker who founded the firm in 1982, stepped down as chief executive in January. A pioneer in utilizing powerful computers to comb markets for trading opportunities, Mr. Simons has long received credit for the firm's hefty returns. Now Peter Brown and Bob Mercer, two lieutenants of Mr. Simons all but unknown to the investing world, must steer the firm through challenging waters. The firm's main funds open to outside investors have posted mediocre results, and Messrs. Brown and Mercer, who are co-CEOs, say they are mulling whether to shut them down.
• Slaughter House Rules. How Democrats may 'deem' ObamaCare into law, without voting. We're not sure American schools teach civics any more, but once upon a time they taught that under the U.S. Constitution a bill had to pass both the House and Senate to become law. Until this week, that is, when Speaker Nancy Pelosi is moving to merely "deem" that the House has passed the Senate health-care bill and then send it to President Obama to sign anyway. Under the "reconciliation" process that began yesterday afternoon, the House is supposed to approve the Senate's Christmas Eve bill and then use "sidecar" amendments to fix the things it doesn't like. Those amendments would then go to the Senate under rules that would let Democrats pass them while avoiding the ordinary 60-vote threshold for passing major legislation. This alone is an abuse of traditional Senate process. But Mrs. Pelosi & Co. fear they lack the votes in the House to pass an identical Senate bill, even with the promise of these reconciliation fixes. House Members hate the thought of going on record voting for the Cornhusker kickback and other special-interest bribes that were added to get this mess through the Senate, as well as the new tax on high-cost insurance plans that Big Labor hates. So at the Speaker's command, New York Democrat Louise Slaughter, who chairs the House Rules Committee, may insert what's known as a "self-executing rule," also known as a "hereby rule." Under this amazing procedural ruse, the House would then vote only once on the reconciliation corrections, but not on the underlying Senate bill. If those reconciliation corrections pass, the self-executing rule would say that the Senate bill is presumptively approved by the House—even without a formal up-or-down vote on the actual words of the Senate bill. Democrats would thus send the Senate bill to President Obama for his signature even as they claimed to oppose the same Senate bill. They would be declaring themselves to be for and against the Senate bill in the same vote.

BusinessWeek.com:

• Trichet Says 'Recurrent' Problem With Greek Data 'Not Tolerable'. European Central Bank President Jean-Claude Trichet said the problem with Greek economic statistics are “not tolerable,” according to the transcript of an interview with Euronews. “There has been a recurrent problem — to be sure that we have the right figures,’’ Trichet told Euronews, according to the transcript posted on its Web site. “This is not tolerable. This should not be tolerated for one second more.”
• Dollar May Gain on 'Resistance Zone' Break: Technical Analysis. The US dollar may advance to this year's high against the yen if it breaks through a "zone of resistance" near its 200-day moving average, JPMorgan Chase(JPM) said.

CNNMoney:

• No Room for Error on U.S. Debt. The United States isn't in jeopardy of losing its gold-plated credit rating, though by one measure America is closer to the ratings-downgrade danger zone than Spain. That's according to credit rating agency Moody's. In a quarterly report about sovereign debt, Moody's analysts wrote that despite market worries about rising government debt levels, there is "no imminent rating pressure" for the United States and other big governments carrying its highest triple-A rating. But the report added that these governments' margin for error "has in all cases substantially diminished," thanks to a weak outlook for economic growth and enormous debt loads taken on to quell the financial meltdown of 2008-2009.

Business Insider:

• Rep. Paul Ryan Shreds Democrats On Healthcare, Accuses Them Of Making A Mockery Of Transparency. Fans of GOP boy wonder Rep. Paul Ryan will want to check out the statements he made in committee today. You can watch the video or read the transcript embedded below, but either way you slice it, he savages the Democratic establishment over their lack of transparency in these final hours to ram healthcare through the Congress.

Crain's New York:

• Citi(C), JPMorgan(JPM) Eye Inventment in Chicago Bank. The big banks hold talks with ailing ShoreBank, a politically-connected financial institution that focuses on low-income neighborhoods. Chicago's ShoreBank is talking with a group of the nation's largest banks, including J. P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc., about a financial rescue package for the troubled, high-profile lender to the poor. ShoreBank management met last Thursday with representatives of the big banks and the Chicago-based John D. and Catherine T. MacArthur Foundation to discuss an equity infusion of $200 million or more, Crain's has learned. Much of the money would come from banks and foundations, some of which already hold stakes in ShoreBank. A sufficient injection of private-equity capital would enable the bank to qualify for $70 million in federal bailout funds. The potential rescue of ShoreBank by giant institutions that normally wouldn't concern themselves with a struggling community lender underscores the bank's wide renown for lending in neighborhoods other banks often shun, a reputation that gives it influence with national political leaders. In addition to Chase, B of A and Citigroup, sources say there have been efforts to include Goldman Sachs Group Inc.(GS) in the rescue. But it's not clear whether New York-based Goldman will participate.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 26% 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 -16 (see trends).

Politico:

• Left Warns Dems on Health Care Vote. Labor and progressive leaders are threatening House Democrats who oppose health care legislation with potentially destructive third party challenges in November. The discussions have already taken concrete form in New York State, where a handful of votes hang in the balance. They’re part threat, part an early attempt to channel what liberal leaders expect to be a wave of anger if Congress fails to pass health care. New York and a handful of other states have “fusion” rules that allow candidates to run on multiple ballot lines, giving minor parties like the Working Families a great deal of political leverage. For wavering Upstate New York moderates like Reps. Michael Arcuri, Scott Murphy, and Bill Owens, the line could mean the margin between victory and defeat. The first target, however, seems to be Rep. Michael McMahon, a New York City Democrat who has indicated he opposes the bill. The left has already sponsored a serious primary challenge to Senator Blanche Lincoln in Arkansas, but backing third-party candidates – who could easily split the vote and hand a seat to the Republicans – would mark a new level of disgust with Democrats opposed to health care.
• Lawmakers Spend 1K/Month on Taxpayer-Funded Cars. The economy is still limping along, but some members of Congress are nevertheless riding in style: At least 10 House members are spending more than $1,000 a month in taxpayer money to lease cars. Rep. Emanuel Cleaver appears to be the biggest spender. In the last quarter of 2009, the Missouri Democrat doled out $2,900 a month to lease a WiFi-equipped, handicap-accessible mobile office that runs on used cooking oil. Some lawmakers blame their high lease costs on a policy, enacted in a 2007 energy bill, requiring that the vehicles they choose be fuel efficient. Others say their two-year terms in office prevent them from taking advantage of lower-cost, longer-term leases. A spokesman for House Intelligence Committee Chairman Silvestre Reyes (D-Texas), who is paying $1,628 to lease a GMC Yukon, cited those reasons — and others.

Reuters:

• Google(GOOG) Sees Mobile Ad Rates Passing PC Rates. Google Inc (GOOG) said that it expects the rates that companies pay for search ads on mobile phones could surpass the rates of its existing PC-based ad business thanks to the growing popularity of powerful smartphones. Google Engineering Vice President Vic Gundotra did not say when he expected the crossover in the so-called cost per click of its search ads to occur, during a webcast to analysts about the company's mobile business on Monday. But he said that mobile ad rates have increased "dramatically" in recent years.And he noted that the number of Google searches on mobile phones have increased five-fold in the last two years. He cited the availability of technology, such as the GPS data that can tell Google a phone user's physical whereabouts, as helping the company create more "relevant" online ads. "We hope and believe that there's even a chance that we could exceed desktop in the future," Gundotra said in reference to the cost per click of mobile ads.
• Microchip(MCHP) Raised Q4 Outlook. Microchip Technology Inc (MCHP) modestly raised its fourth-quarter outlook, citing strong bookings and sales activities. The chipmaker now expects fourth-quarter earnings of 42 cents a share, excluding items, on revenue that is 8 percent higher on a sequential basis. For the third quarter, revenue was $250.1 million. Analysts were looking for 36 cents a share, including options expense, on revenue of $264 million, according to Thomson Reuters I/B/E/S.

Financial Times:

• Hopes Rise of Deal on Hedge Fund Rules. Pressure was mounting for a compromise deal on Tuesday on the European Union’s draft rules on hedge funds and private equity which would reduce British opposition to the regulation. Finance ministry officials from around the 27-member bloc were locked in last-minute talks with Spanish diplomats before Tuesday’s meeting of EU finance ministers.Spain, which holds the rotating EU presidency, said it was optimistic that an agreement would be reached. Mr Garrido said the deal would include a provision for “some kind of European passport”, allowing approved funds to market across the bloc rather than be subject to country-by-country rules but did not elaborate further. UK officials insisted that – in spite of numerous changes made to the European Commission’s original draft proposals – they still had concerns about implementation of the planned rules and how these could affect EU competitiveness.
• Lehman Report Raises Derivatives Clearing Fears. Details which have emerged about the scramble at CME(CME), the world’s biggest futures exchange, after the collapse of Lehman Brothers, have raised questions over how effectively clearing houses can process the growing volume of derivatives. A court-appointed examiner’s report into Lehman’s final hours released last week says CME convened an emergency committee that conducted a forced transfer of the bank’s positions, the only time this has been done by the exchange operator. Lehman, a clearing house member, had $4bn in margin accounts to back-stop commitments for customers as well as big proprietary bets on energy, interest rate and stock-index futures. CME’s clearing house withstood Lehman’s collapse, but observers say the events of September 2008, detailed in the 2,200-page report by Anton Valukas, show the risks of clearing less liquid contracts. “They handled it in the end, but it does demonstrate that somebody is on the hook for the implosion of a clearing member,” said Craig Pirrong, finance professor at Houston University. The blow-by-blow details of the challenges CME faced to ensure all Lehman’s cleared contracts were honoured comes amid growing pressure from regulators for more derivatives contracts to be shifted to centralised clearing as a way of spreading the risk of counterparties defaulting. CME officials also worried that JPMorgan might stop acting as Lehman’s settlement bank. “Although it was technically possible to conduct transactions with the CME without a settlement bank, no CME clearing member had ever done so,” the report said. An exchange risk manager warned this “presented an unprecedented situation and additional risk to the CME”, says the report. CME twice sought to find bidders for Lehman’s positions, leading to a forced sale of a clearing member’s positions for “the first and only time”, and leading to substantial losses for the bank.
• Germany Rebuffs Lagarde Criticism. German politicians and industry leaders on Monday closed ranks in the face of criticism from France that years of moderate wage rises had raised the competitiveness of Europe’s largest economy at the expense of its neighbours. A representative of Chancellor Angela Merkel said Germany’s success was based on strong companies, which was why the question “How can other states do this, too?” was more relevant than asking Germany “to somehow stop” its export-driven economy. Werner Schnappauf, BDI general-secretary, said Germany’s success at exporting was not the result of “some planned model”, but reflected “the competitiveness of German companies on global markets”. Instead of falsely accusing Germany of “wage dumping” or following “a beggar-thy-neighbour policy”, countries that had trouble competing should “improve their competitiveness through tough reforms and wage policy founded on productivity”. In order to save German manufacturing from losing its markets to cheaper Asian and eastern European rivals, the country’s companies and employers spent the opening years of the century agreeing moderate pay deals in order to raise productivity. The policy – encouraged by the government – led to a revival of Germany as an exporting economy, but also to years of consumer torpor as the nation’s workers saved for a rainy day.

Telegraph:

• Britain Warns China Against Protectionism. Britain has warned China against protectionist behaviour, as British businesses complain of being forced out of the Chinese market. The mood among foreign businesses operating in China has soured dramatically, with many complaining that they are facing the worst conditions for decades. Across a wide range of sectors, China has implemented protectionist measures in order to boost its domestic firms and lock out foreign competitors. Mr Miliband warned that the ability of Western governments to keep their markets open depended on the public perception that China was doing the same. "It is worrying that we are seeing more reports of foreign investors in emerging economies encountering new barriers to investment," he said. "This not only increases protectionist pressures in Europe and the United States, it also deprives China and other emerging economies of cutting-edge technologies which in turn raises their own competitiveness," he said, in a speech to Shanghai's Institute of International Studies. The Foreign secretary also warned that without active cooperation from the Chinese, the global economy could continue to suffer from "harmful, persistent imbalances between countries".

Evening Recommendations
Citigroup:

• Rated (VRUS) Buy, target $34.
• Reiterated Buy on (VPRT), target $64.
  

Night Trading

• Asian indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 93.0 +3.0 basis points.
• S&P 500 futures +.08%
• NASDAQ 100 futures +.09%

Morning Preview Links

Earnings of Note
Company/Estimate

• (FDS)/.74
• (DSW)/.31
• (DFS)/.02
• (APP)/.04
• (RUE)/.30

Economic Releases
8:30 am EST

• The Import Price Index for February is estimated to fall -.2% versus a +1.4% gain in January.
• Housing Starts for February are estimated to fall to 570K versus 591K in January.
• Building Permits for February are estimated to fall to 601K versus 621K in January.

2:15 pm EST

• The FOMC is expected to leave the benchmark fed funds rate at .25%.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The BoJ rate decision, weekly retail sales reports, weekly API energy inventory report, Roth Growth Stock Conference, Goldman Sachs Industrials Conference, (CMI) analyst meeting, (PCL) analyst meeting, (STN) Investor Day, Jefferies Cleantech Conference and the ABC Consumer Confidence reading could also impact trading today.

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

Stocks Reversing Higher into Final Hour on Short-Covering, Bargain-Hunting, Lower Energy Prices

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 18.09 +2.90%
  
• ISE Sentiment Index 101.0 -18.55%
  
• Total Put/Call .81 -5.81%
  
• NYSE Arms 1.17 -26.20%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 84.98 bps +2.65%
  
• European Financial Sector CDS Index 71.75 bps +2.89%
  
• Western Europe Sovereign Debt CDS Index 67.42 bps +2.71%
  
• Emerging Market CDS Index 221.28 bps +1.97%
  
• 2-Year Swap Spread 19.50 bps -1.5 bps
  
• TED Spread 12.0 bps unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .14% unch.
  
• Yield Curve 276.0 bps +2 bps
  
• Copper Days Demand 15.18 days +.71%
• Citi US Economic Surprise Index +36.30 +.2 point
  
• 10-Year TIPS Spread 2.26% -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating -21 open in Japan
• DAX Futures: Indicating +31 open in Germany

Portfolio:

• Slightly Lower: On weakness in my Biotech and Tech long positions
• Disclosed Trades: Added an emerging market short, added to (GOOG) long
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is neutral as the major averages are trading at session highs despite healthcare/financial reform fears. On the positive side, (XLF) has outperformed for most of the day and is now in positive territory. Retail, Restaurant, Hospital, Medical and Telecom shares are especially strong, rising .50%+. The US dollar has traded very well throughout the day, while commodities have weakened. On the negative side, Commodity, Gaming and Semi stocks are meaningfully lower on the day, falling -1.5%+. The action in Chinese shares remains a big concern. As well, underperformance by US market leaders is a red flag. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, stable long-term rates and declining energy prices.

Today's Headlines

Bloomberg:

• Pound Bears Bet More Than When George Soros Beat BOE. Futures traders are more bearish than ever on sterling amid concern that the currency’s worst annual start in 13 years will continue as the U.K.’s budget deficit approaches the Greek shortfall that roiled the euro. Wagers on the pound weakening against the dollar outnumber futures that profit on a rise by eight times more than when George Soros made $1 billion betting against the currency in 1992, the year Prime Minister John Major’s Conservative government was forced to withdraw from the European Exchange Rate Mechanism. “The risk of a U.K. double dip is substantial,” said Hans-Guenter Redeker, London-based head of foreign-exchange strategy at BNP Paribas SA, which predicts an additional 13 percent drop to $1.31 by the end of 2010. “Sterling is increasingly trading like an emerging-market currency with rising bond yields no longer working in favor of the currency.”
• Goldman Sachs(GS) Demand Collateral It Won't Dish Out. Goldman Sachs Group Inc. and JPMorgan Chase & Co.(JPM), two of the biggest traders of over-the- counter derivatives, are exploiting their growing clout in that market to secure cheap funding in addition to billions in revenue from the business. Both New York-based banks are demanding unequal arrangements with hedge-fund firms, forcing them to post more cash collateral to offset risks on trades while putting up less on their own wagers. At the end of December this imbalance furnished Goldman Sachs with $110 billion, according to a filing. That’s money it can reinvest in higher-yielding assets. “If you’re seen as a major player and you have a product that people can’t get elsewhere, you have the negotiating power,” said Richard Lindsey, a former director of market regulation at the U.S. Securities and Exchange Commission who ran the prime brokerage unit at Bear Stearns Cos. from 1999 to 2006. “Goldman and a handful of other banks are the places where people can get over-the-counter products today.”
• Copper Falls to Two-Week Low on Concern Chinese Demand May Wane. Copper fell to a two-week low on concern that demand from China, the world’s largest user, may weaken because of steps aimed at cooling economic growth. Economists from Morgan Stanley said China’s central bank may boost interest rates as early as April. “The market is freaked out right now about a tightening policy in China,” said Matthew Zeman, a LaSalle Futures Group trader in Chicago. “If stimulus efforts are withdrawn too early, it could stifle what little momentum the global economy has.”
• China's Shanghai Index May Drop to 2,500, Guotai Says. China’s benchmark stock index may fall a further 17 percent to 2,500 in the first half as the government steps up measures to cool growth, according to Guotai Junan Securities Co., the nation’s second-largest brokerage. The Shanghai Composite Index, which has declined 9.2 percent this year, may extend losses as interest rates rise and the government increases reserves banks need to set aside for loans after consumer prices and fixed-asset investment climbed more than estimated, said Zhang Kun, a strategist at the Shanghai-based brokerage, in a telephone interview today. “
• Buy Real Put Options to Hedge Elections, BofA Says. Bank of America Corp. recommended clients buy real put options to hedge against the risk that Brazil’s presidential election in October will spark a “short- lived” slump in the currency. “We do not believe the upcoming presidential elections should be treated as a non-event, as markets seem to be doing right now,” analysts led by Sao Paulo-based Virgilio Castro Cunha wrote in a note today. “The market currently offers attractive hedging opportunities.” Investors should buy nine-month put options, which give them the right to sell the currency, at a strike price of 1.95 per dollar, the analysts wrote. President Luiz Inacio Lula da Silva’s chosen successor, Cabinet Chief Dilma Rousseff, has narrowed to single digits the lead of Sao Paulo state Governor Jose Serra, a member of the opposition Social Democracy Party, in opinion polls.
• Bank of America(BAC), JPMorgan(JPM) Lead Improvement in Late Card Loans. Five of the six biggest U.S. credit-card lenders, led by Bank of America Corp. and JPMorgan Chase & Co., said late payments fell or held steady in February, signaling a retreat from record industry losses. Payments at least 30 days overdue, an indicator of future write-offs, dropped to 7.23 percent, from 7.35 percent in January, Charlotte, North Carolina-based Bank of America said today in a federal filing. New York-based JPMorgan said late payments declined to 4.67 percent from 4.75 percent. Overdue loans fell to 5.51 percent from 5.8 percent at McLean, Virginia-based Capital One Financial Corp., and to 5.5 percent from 5.55 percent at Discover Financial Services, in Riverwoods, Illinois. American Express Co. said payments at least 30 days delinquent were unchanged at 3.6 percent.

Wall Street Journal:

• Ex-U.K. Military Leader Pushes Europe on Defense Capability. The former deputy commander of the multinational forces in Iraq has warned that Europe needs a more unified defense capability if it is to continue to contest a role on the world stage. Lt. Gen. Sir Robert Fry said he was no longer convinced in the assumption that the U.S. would continue to be Europe's prime strategic partner under any circumstances. Gen. Fry, director of operations in the British Ministry of Defense post 9/11, said that in the emerging new world order, Europe should be looking to create conventional forces that could be deployed under a European banner. In an interview with The Wall Street Journal Europe, he said that in an increasingly polarized world, Europe needs a better defined and more unified European defense capability.
• Chinese Censorship of Google(GOOG) Issue Betrays Concerns. Chinese authorities have been explicit and unwavering in their disapproval of Google’s threat to disobey their censorship regulations on its Chinese search site, Google.cn. The company will have to “bear the consequences” for making such an “irresponsible” move, the Minister of Industry and Information Technology said last week. Behind the scenes, however, there are signs that officials realize that their view on Google (GOOG) may not be superpopular. The Communist Party’s Propaganda Department issued requests to media outlets on Friday to halt their coverage of the possible closure of Google’s Chinese Web site, says a Chinese journalist familiar with the situation. Chinese news Web sites have also been told they will be required to use only official accounts of the situation if Google.cn is closed, another individual with knowledge of that order said.
• Accounting Shift Enables China to Shrink Deficit Figure. China's finance ministry changed the accounting for some government spending this year in a way that allowed it to report a planned budget deficit below the symbolic level of 3% of gross domestic product, an examination of budget documents shows. In the budget report it submitted to the legislature earlier this month, China's Ministry of Finance estimated the total budget deficit for 2010 at 2.8% of GDP, "basically the same as last year." A strict cash accounting of government expenditures, however, would push the 2010 deficit up to 3.5% of forecast GDP.
• Hedge Funds, Proprietary Traders Target Social Media For Algos. Hedge funds and proprietary trading shops are working to automate trading on information and sentiment from the blogosphere and Twitter, an effort that could make social media even more influential. The move reflects the continued evolution of automated trading through computer algorithms, with social media being targeted as the latest potential goldmine that could give trading firms an edge. Companies have already been selling feeds for several years that deliver news data directly to automated trading programs. But efforts to do the same with information from blogs have not been as successful. Some leading hedge funds and proprietary trading shops are believed to be doing some amount of automated trading on information from social media already. But Alacra, an aggregator of data from traditional media and blogs, has a product that could make the practice much easier and more widespread. Alacra on Tuesday will launch its PulsePro, a technology suite geared to help humans make more informed business and trading decisions. Meanwhile, there are half a dozen firms, mostly hedge funds, testing a feed of sentiment ratings generated through the product for automated trading. "This is part of a larger trend to utilize unstructured content as an input for various types of trading signals," said Paul Rowady, senior analyst at Tabb Group, a financial markets research firm. He said while the trend began primarily with content from news organizations, social media represents "a natural extension of the trend." Cathers noted some traders use Google (GOOG) Insights--which monitors buzz across the Internet--"as another item in their arsenal." Message boards and StockTwits are other tools firms sometimes use to get a handle on the buzz for stocks they are trading. Alacra's PulsePro tries to tackle the issue in several ways. First, it only looks at blogs the company deems credible. The blogs are combined with articles from traditional media companies for a total of about 3,000 sources. Rather than trying to codify all the text within each source, it focuses on specific items such as quotes from well-reputed Street analysts and C-level executives. Sentiment ratings are assigned based on the language used. Through backtesting, Alacra has found the ratings generated by its product can lead movements in stock prices by about one to three weeks for large-capitalization stocks. In turn, hedge funds and proprietary traders are interested in the feed despite that it won't work anywhere near the lightning-fast speeds they've been achieving for much of their other computer-based trading. Alacra, which now generates almost $20 million in annual revenue, ultimately expects PulsePro to bring in tens of millions of dollars a year.
• Loan Squeeze Thwarts Small-Business Revival.

CNBC:

• 'Comprehensive' Financial-Reform Plan Unveiled by Dodd.

NY Times:

• China Uses Rules on Global Trade to Its Advantage. With China’s exports soaring, even as other major economies struggle to recover from the recession, evidence is mounting that Beijing is skillfully using inconsistencies in international trade rules to spur its own economy at the expense of others, including the United States.

The Business Insider:

• 14 Facts About The Federal Deficit That Will Blow Your Mind.
• With Healthcare On The Ropes, Obama Goes Back To Using Special Deals To Buy Votes.

Detroit News:

• Ford(F) Survey Shows Employees Optimistic About Future. Ford Motor Co.'s latest internal employee survey shows morale is up sharply and employees' confidence in the company's future has reached an all-time high. That is according to Ford's latest quarterly report card, a copy of which was obtained by The Detroit News. It shows that 89 percent of employees have a positive outlook, compared to less than 55 percent in the middle of 2008. The survey was conducted in December. Ford was the only U.S. automaker to pass on federal bailout and the only one to avoid bankruptcy. Despite an overall decline in car and truck sales, it gained 1.1 percentage points of market share in the United States last year. That helped the Dearborn automaker earn more than $2.7 billion -- its first annual profit since 2005. Over the past year, Ford's stock has soared to levels not seen since the end of 2004, and the company has restored some of the employee benefits it previously cut.

Washington Post:

• Rep. Paul Ryan on What Real Health Reform Should Look Like. Today, the House Budget Committee is to mark up a "reconciliation" vehicle, initiating the greatest expansion in government and entitlement spending in a generation through a partisan process to push "health-care reform" across the finish line. Despite claims of transparency and calls for a "simple up-or-down vote," there is nothing simple about this process. This convoluted legislative charade demonstrates how far the Democratic majority has wandered from real health-care reform and cost control, employing any means to achieve political victory. Through any analytical lens, the legislation will not address the central problem of skyrocketing health-care costs. The Congressional Budget Office estimates that families' premiums could rise 10 to 13 percent; private-sector actuarial estimates top these already high numbers. The higher costs are driven by federalizing the regulation of insurance, narrowing consumers' options and reducing competition among providers. The health-care market would be dominated by government programs and the largest insurance companies, operating as de facto government utilities. Rather than tackle the drivers of health inflation, the legislation chases the ever-increasing premiums with huge new subsidies. Already, Washington has no idea how to pay for the unfunded promises in Medicare, Medicaid and Social Security -- and creating this new entitlement would accelerate our path to fiscal ruin. When you strip away the double-counting, expose the hidden costs that must be funded and look at the price tag when the legislation is fully implemented, the claims of deficit reduction are as hollow as claims of cost containment.

AppleInsider:

• February Mac Sales Up 43%, Apple(AAPL) on Track for 2.9M in Quarter. New retail sales data shows Apple has continued to have strong Mac and iPod sales at the start of 2010, with February's numbers showing significant year-over-year growth. Analyst Gene Munster with Piper Jaffray issued a note to investors Monday afternoon detailing the latest retail sales data from the NPD Group. Mac sales in the month of February were up 43 percent for the month, which followed a similarly strong January increase of 36 percent. In all, Mac sales for the first two months of 2010 are up 39 percent year over year. The latest retail data suggests that Apple will sell between 2.8 million and 2.9 million Macs in the March quarter, which is above Wall Street's consensus of 2.7 million Macs. Strong Mac sales were accompanied by better-than-expected iPod sales as well, influencing Munster to call February an "impressive" month for Apple. iPod sales in the first two months of 2010 were up 7 percent, an increase in sales for the first time in over a year. Piper Jaffray has maintained its overweight rating for AAPL stock, and a 12-month price target of $284.

Washington Times:

• Justice, CIA Clash Over Probe of Interrogator IDs. The CIA and Justice Department are fighting over a secret investigation into a controversial program by legal supporters of Islamist terrorists held at Guantanamo Bay that involved photographing CIA interrogators and showing the pictures to prisoners, an effort CIA officials say threatens the officers' lives. The dispute prompted a meeting Tuesday at CIA headquarters between U.S. Attorney Patrick J. Fitzgerald and senior CIA counterintelligence officials. It is the latest battle between the agency and the department over detainees and interrogations of terrorists. Attorney General Eric H. Holder Jr. angered many CIA officials and Republicans in Congress by reopening an investigation last August into whether CIA interrogators acted illegally in questioning senior al Qaeda detainees. According to U.S. officials familiar with the issue, the current dispute involves Justice Department officials who support an effort led by the American Civil Liberties Union to provide legal aid to military lawyers for the Guantanamo inmates. CIA counterintelligence officials oppose the effort and say giving terrorists photographs of interrogators has exposed CIA personnel and their families to possible terrorist attacks.

Rasmussen:

• 43% Favor Health Care Plan, 53% Oppose. Democrats in Congress are vowing to pass their national health care plan with a vote in the House possible by the end of this week. But most voters still oppose the plan the same way they have for months. A new Rasmussen Reports national telephone survey finds that 43% favor the health care plan proposed by President Obama and congressional Democrats, while 53% oppose it. Those findings include 23% who Strongly Favor the plan and 46% who Strongly Oppose it.

Politico:

• Health Care's Family Feud. To understand the machinations behind Monday’s health care announcements, imagine an unhappy young couple trying to cut corners, all the while chaperoned by well-meaning, buttinsky aunts who keep bumping into one another. House and Senate Democrats are the distrustful couple; the Congressional Budget Office and Senate parliamentarian the two strait-laced aunts with conflicting advice on the do’s and don’ts that lie ahead. And as the House Budget Committee kicked off the process Monday afternoon, the rampant confusion is a lesson in the fact that cutting corners is never a good start in Congress.
• Homestretch Scramble for House Votes on Health Care. Barack Obama faces the stiffest test of his first-term agenda — and a defining moment in his presidency — as Democratic Party leaders mount a fevered campaign this week to round up votes for a historic health care bill. Two top aides — senior adviser David Axelrod and press secretary Robert Gibbs — said Sunday the votes will be there. Other Democrats aren’t so sure.

Reuters:

• Russia Corruption "May Force Western Firms to Quit". Extortion by corrupt officials in Russia has got so bad that some Western multinationals are considering pulling out altogether, the head of a U.S. anti-bribery group said in an interview. Alexandra Wrage, whose non-profit organization TRACE International advises firms on how to avoid bribery, told Reuters the "rampant endemic" corruption in Russia was much worse than in other big emerging economies."My recommendation is: 'Maybe you should reconsider doing business in Russia,'" she said. "I am considerably more optimistic about Nigeria than I am about Russia on this issue." Berlin-based NGO Transparency International rates Russia joint 146th out of 180 nations in its Corruption Perception Index, saying bribe-taking is worth about $300 billion a year.
• Ex-NY Bank President First Accused of TARP Fraud. The former president of New York's privately held Park Avenue Bank was arrested and charged on Monday with being the first person to attempt to steal from U.S. government bailout funds in the financial crisis. A 10-count criminal complaint accused Charles Antonucci of devising "an elaborate round-trip loan transaction" that he told others was his own $6.5 million investment in the bank, misleading state bank regulators and the Federal Deposit Insurance Corporation (FDIC). The charges filed in Manhattan federal court said Charles Antonucci "made material and false statements" in the bank's application for $11.2 million from TARP, the Troubled Asset Relief Program.
• U.S. Builder Confidence Slips in March. U.S. home-builder sentiment fell unexpectedly in March, hit by lack of credit for new projects and a flood of foreclosed properties. The NAHB/Wells Fargo Housing Market index fell two points to 15 in March, the group said in a statement. Economists polled by Reuters had expected sentiment to remain steady at 17.

Financial Times:

• Ford(F) Expects More Buyers to Shun Japanese Cars. Alan Mulally, Ford Motor’s chief executive, expects to pick up more market share in the US as the carmaker focuses on quality and freshening up its product range while rival Toyota grapples with a global products recall. Mr Mulally, who joined Ford from Boeing more than three years ago, said the carmaker had increased market share in 14 of the past 15 months in the US, selling more cars than General Motors and Toyota for the first time since 1998.“We’re continuing to pick up more and more new Ford customers from our competition,” Mr Mulally said in an interview with the Financial Times in New Delhi, when asked about the Toyota recall. “We’re getting a lot of customers that before had selected Japanese products.” Mr Mulally said it was too early to quantify the impact of the Toyota’s recall of more than 8m cars in relation to faulty accelerator pedals, jamming floormats and braking problems. But he added that last year 30 per cent of Ford’s new customers had migrated over from Japanese cars. Ford sold 43 per cent more vehicles year-on-year in the US in February, or 142,285 units, pushing it up to the number one position. Some analysts predict Ford could this year maintain a lead on Toyota and GM, which has been restructuring following its government-backed bankruptcy last year.

Vendomosti:

• VTB Group, Russia's second-largest bank, has more than $2 billion in overdue loans, an increase of 50% in the last year, citing calculations based on data provided by the lender.

la Repubblica:

• Greece will choose to abandon Europe's single currency, and Spain, Portugal and Italy may eventually do the same, economist Allen Sinai said. "Greece's growing deficit and debt are excessive and there's no hope," Sinai, president of Decision Economics Inc. in New York, said.

Haaretz:

• Israel Envoy: U.S. Ties at Their Lowest Ebb in 35 Years. Israel's ambassador to the United States, Michael Oren, has told the country's diplomats there that U.S.-Israeli relations face their worst crisis in 35 years, despite attempts by Prime Minister Benjamin Netanyahu's office to project a sense of "business as usual." Oren was speaking to the Israeli consuls general in a conference call on Saturday night. "The Obama Administration's recent statements regarding the U.S. relationship with Israel are a matter of serious concern," said AIPAC in a statement issued on Sunday. AIPAC is considered the most influential pro-Israel pressure group in the United States. "AIPAC calls on the administration to take immediate steps to defuse the tension with the Jewish State," the statement said. "The Administration should make a conscious effort to move away from public demands and unilateral deadlines directed at Israel, with whom the United States shares basic, fundamental, and strategic interests," the AIPAC statement said. Earlier Sunday, Netanyahu continued to consult with the forum of seven senior cabinet ministers over a list of demands that U.S. Secretary of State Hillary Clinton made in a telephone conversation Friday. Haaretz has learned that Clinton's list includes at least four steps the United States expects Netanyahu to carry out to restore confidence in bilateral relations and permit the resumption of peace talks with the Palestinians:

Bear Radar

Style Underperformer:
Mid-Cap Growth (-1.10%)

Sector Underperformers:
Coal (-5.68%), Gaming (-2.77%) and Semis (-2.21%)

Stocks Falling on Unusual Volume:
SWC, MMR, ATPG, CTEL, VSEA, KLAC, VIP, STO, PANL, ALGN, ZOLL, STRL, RECN, EZPW, ULTA, HITK, JST, EXLS, NITE, LRCX, SGI, AONE, AIPC, GPRE, ATHR, DWA, ESIO, WPI, CGV and CNX

Stocks With Unusual Put Option Activity:
1) EK 2) PXP 3) ALL 4) CNX 5) KLAC

Bull Radar

Style Outperformer:
Large-Cap Value (-.57%)

Sector Outperformers:
Restaurants (+.33%), Medical Equipment (+.19%) and Telecom (+.17%)

Stocks Rising on Unusual Volume:
STJ, MDT, WMT, CXG, AMLN, ALKS, BIDU, OGXI, HUSA, CSGP, RDEA, HWCC, CTCT, RINO, PEGA, ZBRA, PVH and OLP

Stocks With Unusual Call Option Activity:
1) BSX 2) WHR 3) NITE 4) 5) WU

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