North American Investment Grade CDS Index 84.50 +1.19%
European Financial Sector CDS Index 163.16 bps +1.46%
Western Europe Sovereign Debt CDS Index 199.08 bps -5.54%
Emerging Market CDS Index 201.38 +.20%
2-Year Swap Spread 23.0 unch.
TED Spread 16.0 unch.
Economic Gauges:
3-Month T-Bill Yield .14% unch.
Yield Curve 273.0 -3 bps
China Import Iron Ore Spot $176.50/Metric Tonne +.63%
Citi US Economic Surprise Index +40.20 +3.8 points
10-Year TIPS Spread 2.35% -4 bps
Overseas Futures:
Nikkei Futures: Indicating +11 open in Japan
DAX Futures: Indicating -20 open in Germany
Portfolio:
Slightly Higher: On gains in my Medical, Ag and Retail long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades slightly lower, despite declining eurozone debt fears and gains in overseas equities. On the positive side, Road & Rail, Education, Hospital, Ag, HMO and I-Banking shares are especially strong, rising more than .5%. The Transports are higher on the day and (IYR) is also outperforming. Lumber is rising +1.02%. The 10-year yield is falling -6 bps to 3.3%. The Citi US Economic Surprise Index is now at the highest level since April 12th of last year. The Italy sovereign cds is falling -6.56% to 213.06 bps, the Spain sovereign cds is falling -7.75% to 306.65 bps, the Portugal sovereign cds is declining -2.9% to 498.21 bps and the Belgium sovereign cds is falling -9.54% to 208.55 bps. Moreover, the European Investment Grade CDS Index is dropping -2.46% to 87.46 bps, which is also a huge positive. The AAII % Bulls fell to 52.34 this week, while the % Bears rose to 23.44, which is a mild positive. On the negative side, Gaming, Drug, Construction, Bank, Computer, Steel and Alt Energy shares are under pressure, falling more than .75%. (XLF) has underperformed throughout the day. The UBS-Bloomberg Ag Spot Index is hitting another record high today, rising +.52%. The China sovereign cds is rising +3.63% to 77.27 bps and the US sovereign cds is climbing +4.81% to 43.44 bps. The Euro Financial Sector CDS Index is still trending higher. The Western Europe Sovereign CDS Index is still just modestly below its record high set on Monday. Today's comments from ratings firms on US sovereign debt, as munis suffer another sell-off, are likely weighing on equities. The broad market continues to trade well overall. Given the decline in the eurozone cds and stabilization in the euro currency, today's pullback looks like healthy profit-taking to me. I expect US stocks to trade modestly higher into the close from current levels on declining eurozone debt angst, short-covering and a bounce in the euro.
Sovereign Bond Risk Falls as EU Steps Up Debt-Plan Efforts. The cost of insuring sovereign bonds fell as the European Union’s leaders stepped up efforts to end the debt crisis. Credit-default swaps on Spain dropped 32 basis points to 317, the lowest level in six weeks. Contracts on Portugal, Belgium and Greece also fell, helping push the Markit iTraxx SovX Western Europe Index of swaps on 15 nations down 9 basis point to 197, according to CMA. Speculation policy makers will increase aid to Europe’s debt-ridden governments helped boost demand for Spanish debt today after lowering borrowing costs for Portugal yesterday. European finance ministers may extend help to Portugal, increase the size of their aid reserves, lower interest rates on bailout loans and authorize purchases of outstanding bonds. “The sovereign debt story will stay and dominate sentiment until actual measures are taken,” Christian Weber, a strategist at UniCredit SpA, wrote in a note to investors. “A strong commitment to a stronger capital base for Spanish banks is desperately needed to reduce uncertainty surrounding Spanish banks, allowing them to effectively consolidate.” Default swaps on Portugal declined 29 basis points to 477, Belgium dropped 21.5 basis points to 208 and Greece was down 37.5 at 960, CMA prices show. Italy decreased 18 basis points to 207 and Ireland fell 21 basis points to 637. Default swaps on Portugal declined 29 basis points to 477, Belgium dropped 21.5 basis points to 208 and Greece was down 37.5 at 960, CMA prices show. Italy decreased 18 basis points to 207 and Ireland fell 21 basis points to 637.
Top U.S. GDP Forecaster Herrmann Sees Consumer Aiding Growth. The world’s largest economy will expand in 2011 at the fastest pace in six years as American consumers boost spending, said John Herrmann, a senior fixed- income strategist at State Street Global Markets LLC. Herrmann, whose forecasts for gross domestic product were the most accurate over the past year according to data compiled by Bloomberg News, estimates the amount of all goods and services produced will grow 3 percent this year, the most since 2005. He said household purchases will also climb 3 percent after rising 1.8 percent in 2010, the first gain in three years. Herrmann is among the economists surveyed by Bloomberg this month who raised growth and spending estimates after President Barack Obama signed into law an $858 billion bill on Dec. 17 extending Bush-era tax cuts for two years. The measure also renewed emergency jobless benefits for the long-term unemployed and cut 2011 payroll taxes by two percentage points. “The tax-relief program is going to be a big support for growth,” Herrmann, who last month projected the economy would grow 2.9 percent this year, said in an interview.
Doctors Say Giffords Makes 'Major Leap Forward'. U.S. Representative Gabrielle Giffords, shot in the head in last weekend’s Arizona rampage, has made a “major leap forward” in her recovery and can move her legs on command, doctors in Tucson said. Doctors have started physical therapy and had her “dangling on the side of the bed” today, Peter Rhee, trauma chief at Tucson’s University Medical Center, told reporters at a news conference. She is starting to open her eyes and become aware of her surroundings, including the presence of family and friends, said neurosurgeon Michael Lemole. “She is able to move both of those legs to command,” Lemole said. “That’s huge.” “This is a major leap forward; this is a major milestone for her,” Lemole said. Rhee said doctors hope to put her in a chair tomorrow and may remove her breathing tube in the next few days.
OPEC to Cut Loadings as Asian Demand Slows, Oil Movements Says. The Organization of Petroleum Exporting Countries will reduce crude loadings this month, partly as demand from Asia slows, according to tanker-tracker Oil Movements. Shipments will drop 0.9 percent to 23.51 million barrels a day in the four weeks to Jan. 29 from 23.72 million barrels in the period to Jan. 1, Oil Movements said today in a report. Shipments to Asia from the Middle East and West Africa will drop to 14.6 million barrels a day in the four weeks to Jan. 29 from 15.1 million at the end of December, Mason said. A total of 478.33 million barrels of crude will be on board tankers in the month to Jan. 29, down 0.9 percent from the Jan. 1 figure of 473.86 million, according to Oil Movements.
Corn, Soybeans Extend Rallies on Signs of Smaller U.S. Reserves. Corn and soybean futures rose, extending a rally to the highest prices since July 2008, on signs that inventories will be tighter than expected in the U.S., the world’s largest grower and exporter. The U.S. Department of Agriculture yesterday cut its estimate of the country’s 2010 corn harvest and said inventories will fall to 5.5 percent of consumption, the lowest since 1996. The estimate of soybean output was cut for the third time since October, reducing reserves to 4.2 percent of projected demand. “The report gave all the bulls the confidence they need to own the market,” said David Smoldt, a vice president for FCStone Group LLC in West Des Moines, Iowa. The ratio of ending stockpiles to usage “in corn is the second tightest on record, and soybeans is a record low,” he said. Corn futures for March delivery rose 12.25 cents, or 1.9 percent, to $6.4325 a bushel at 10:12 a.m. on the Chicago Board of Trade, bringing its two-day advance to 6 percent.
Palladium Jumps to Highest Price Since 2001 on Automotive, Investor Demand. Palladium rose to the highest level since 2001 as improved prospects for the automotive industry, the main consumer, helped to spur investment demand amid falling gold prices. Palladium for March delivery climbed as high as $825.10 an ounce, the highest level since March 20, 2001, on the New York Mercantile Exchange. The metal, used in pollution-control gear for vehicles along with platinum, was up $9.10, or 1.1 percent, at $815.85 at 10:43 a.m. local time, gaining for a third day.
Commodity Speculation Limits Divide CFTC With Dodd-Frank Deadline Looming. Curbing speculation in raw materials including oil, gold and wheat has touched off a battle at the top U.S. commodities regulator with a legal deadline to rein in traders just four days away. Commissioner Scott O’Malia said today fellow commissioners are attempting a “Trojan horse” move that would impose limits without proper debate. The Dodd-Frank Act gave the CFTC until Jan. 17 to curb speculation in the energy and metals markets and until April in agricultural commodities. The plan under discussion would limit traders to 25 percent of deliverable supply in the contract nearest to expiration, followed by an all-month ceiling of 10 percent of open interest up to the first 25,000 contracts and 2.5 percent thereafter. Regulators and lawmakers are attempting to rein in commodity speculation amid concern that investors contributed to oil reaching the record high of $147.27 a barrel in 2008.
Chevron(CVX) to Drill Deeper to Expand Brazil Project. Chevron Corp., the second-largest U.S. oil company, plans to expand its $3 billion Frade project off Brazil’s coast as it bets on finding more crude by drilling deeper wells. Chevron may start work to tap deep-water reservoirs beneath a layer of salt in late 2011 or early 2012, said Ali Moshiri, head of exploration and production for Africa and Latin America.
Illinois Governor Pat Quinn to Seek $8.75 Billion Bond to Pay Bill Backlog. Illinois Governor Pat Quinn will ask lawmakers next month to authorize an $8.75 billion bond sale to pay $6 billion in backlogged bills. The state House of Representatives defeated a borrowing bill in the final hours of the legislative session Tuesday that was designed to eliminate the pile of invoices that is at least five months old. It was part of a package of measures that included a 67 percent increase in the personal income tax aimed at plugging a $13 billion budget hole amid the state’s worst financial crisis. Legislators are to return to Springfield next month. The biggest tax increase in Illinois history drew applause from investors, gloating from neighbors and scorn from taxpayers and businesses. Quinn went on the defensive. The tax boost was needed to protect a state that was “careening toward bankruptcy and fiscal insolvency,” the Democratic governor said at a news conference yesterday in Springfield, the capital. The personal income-tax rate increase to 5 percent from 3 percent, which took effect immediately, was the cornerstone of a budget-balancing package supported only by Democrats. The plan boosted the corporate income tax by 46 percent, to a rate of 7 percent from 4.8 percent. “It’s the worst time in the world to be raising taxes on the citizens and businesses of this state,” said W. James Farrell, former chief executive officer of Illinois Tool Works Inc. and chairman of the Commercial Club of Chicago, echoing the view of Chicago Mayor Richard Daley. Today, Texas Governor Rick Perry vowed that Texas would try to recruit Illinois employers. “You can’t have an economy that will grow if you tax and put a burden on those who will risk their capital that will in turn create the job,” he said in a speech to the Texas Public Policy Foundation’s annual legislative conference in Austin. “It’s just that simple.”
Trichet Moves to Inflation-Fighting as EU Bats Crisis. European Central Bank President Jean-Claude Trichet signaled he’s prepared to raise interest rates if needed to fight inflation even as leaders struggle to contain the region’s sovereign-debt crisis. “We are permanently alert, we are never pre-committed not to move interest rates and our level of interest rates is designed to deliver price stability,” Trichet said at a press conference in Frankfurt today. At the same time, the benchmark rate, which the ECB left at 1 percent, is still “appropriate.” Trichet is trying to keep a lid on inflation without roiling financial markets spooked by the euro region’s fiscal crisis. While increases in consumer prices exceeded the ECB’s ceiling for the first time in more than two years in December, higher interest rates would saddle debt-laden countries such as Ireland, Greece and Portugal with still higher borrowing costs.
Initial U.S. Jobless Claims Rose More Than Forecast to 445,000 Last Week. The number of first-time claims for unemployment insurance payments jumped in the first week of 2011 to the highest level since October as more Americans lined up to file following the holidays. Initial jobless claims rose by 35,000 to 445,000, according to Labor Department data released today. The median estimate in a Bloomberg News survey called for 410,000 filings. The average number of applications over the past four weeks, a less-volatile gauge, increased to 416,500. The unemployment rate among people eligible for benefits fell to 3.1 percent in the week ended Jan. 1, from 3.3 percent the prior week, today’s report showed.
S&P, Moody's Warn On U.S. Credit Rating. Two leading rating firms have cautioned the U.S. on its credit rating, expressing concern over a deteriorating fiscal situation that they say needs correction. The warnings issued Thursday echoed prior statements by the companies, however, and financial markets largely ignored them. Treasury yields, which move in the opposite direction as prices, were lower in late-morning trade and the cost of insuring U.S. debt against the risk of default, already below that of Germany, the euro-zone benchmark, barely budged."My traders are shrugging it off as stuff we've heard before," said Tom Di Galoma, head of interest-rate trading at Guggenheim Partners in New York. Moody's Investors Service said in a report that the U.S. will need to reverse an upward trajectory in the debt ratios to support its triple-A rating. "We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase," said Sarah Carlson, senior analyst at Moody's. "The view of markets is that the U.S. will continue to benefit from the exorbitant privilege linked to the U.S. dollar" to fund its deficits, Carol Sirou, head of S&P France, said at a conference in Paris on Thursday. "But that may change. We can't rule out changing the outlook" on the U.S. sovereign debt rating in the future, she warned. She added the jobless nature of the U.S. recovery was one of the biggest threats to the U.S. economy. "No triple-A rating is forever," she said. Moody's said the U.S., Germany, France and the U.K. still have debt metrics, including the debt affordability, compatible with their triple-A ratings at Moody's. But all four countries must bring the future costs arising from pension and health care subsidies under control if they "are to maintain long-term stability in their debt burden credit metrics," Moody's said in its regular triple-A Sovereign Monitor report. The most recent official figures show the ratio of federal debt to revenue averaging 397% of gross domestic product in the period to 2020, while the ratio of interest to revenue will rise to 17.6% by 2020, from 8.6% in the last fiscal year. "These figures are "quite high for an Aaa-rated country," Moody's said. Debt affordability is "very important to the rating process," Ms. Carlson said. U.S. general government debt affordability, including states and municipalities, is "rising over time to a high level for an Aaa-rated country," the report said.
Christie Eyeing Teacher Tenure. Thanks to tenure, many believe that teachers' jobs are basically guaranteed, no matter how students do. New Jersey Gov. Chris Christie wants to change that: He is seeking to end tenure and on Wednesday said he would support switching to a system that gives individual teachers five-year contracts, which districts could renew based on merit. He said he believes that if the worst 5% of teachers were churned, there would be a "quantum effect" on performance.
CNBC:
Hedge Funds: The Next Too Big To Fail Members?Hedge fund regulation is having a seriously perverse—if entirely predictable—effect. Large hedge funds are growing larger, well-known star managers are accumulating more assets under management, and competition from start-ups is becoming scarcer. Barrier to entry and costs of regulatory compliance have risen dramatically. A new fund must start its life with at least $100 million of assets under management to be commercially viable, according to Hester Plumridge of Heard On The Street. A few years ago, the price of entry was just $50 million. Much of this is due to new reporting and regulatory requirements both in the US and Europe. The demise of the fund-of-funds sector—largely a side-effect of the Madoff scandal—has further contributed to the problem.
Auto Work Force Gets Dividend From Industry's Rebound. The sweeping overhaul and surprising recovery of the American auto industry is about to pay off handsomely for the blue-collar workers at Ford(F) and General Motors(GM).
FINalternatives:
CalPERS Under Fire Over Portfolio Risk. One of the world’s largest hedge fund investors may be in some hot water over those investments. The Securities and Exchange Commission is looking into whether the California Public Employees’ Retirement System had misled investors about the risks in its massive portfolio when it backed a state bond sale, The New York Times reports. It is not clear that CalPERS’ hedge fund or private equity portfolios are a target of the SEC probe. But the asset classes are a sizeable chunk of the pension’s $220 billion portfolio and contributed to its 25% loss during the financial crisis. That loss has saddled California with billions in replacement costs. The SEC is looking into whether the state should have disclosed that possibility in its bond prospectus.
Brevan Howard Suffers Its Worst Year. January 13, 2011 - Alan Howard’s massive Brevan Howard Master Fund suffered its worst year since its 2003 inception. The roughly $19 billion hedge fund finished the year up less than 1 percent (through December 23, 2010). The macro fund accounted for the bulk of the firm’s $27 billion in assets, which last year made it the UK’s largest hedge fund firm and the fourth largest in the world. The fund muddled along all year and lost money in each of the final three months.
MailOnline:
Intel(INTC) Takes Aim at Chip-Maker. Well above average turnover of late in AIM stock IQE suggests something surely must be up. More than 10m shares in the compound semiconductor specialist changed hands again yesterday and the close was 4p better at a high of 52.25p amid whispers that not only a bullish trading update from the company is just around the corner but Intel, the world’s largest semiconductor chip maker, is looking to buy the company with loose change.
Irish Times:
EU Ministers to Discuss Lowering Irish Bailout Interest Rate. EURO ZONE finance ministers are to discuss a reduction to the 5.7 per cent interest charge on Irish bailout loans as early as next week, a move that follows repeated criticism that the current rate is too high.
Spain Wins 'Breathing Space' Buoyed by Portugal Debt Auction: Euro Credit. Spain’s first bond auction of 2011 may be buoyed by Portugal’s success selling debt yesterday and European efforts to bolster the region’s sovereign-bailout fund. Spain plans to sell as much as 3 billion euros ($3.9 billion) of five-year bonds today. Securities of similar maturity yielded 4.813 percent yesterday on the secondary market, up from 3.576 percent at the last auction on Nov. 4. Italy, the euro region’s second-most indebted nation, aims to issue as much as 6 billion euros of debt due in 2015 and 2026. The yield on Spain’s benchmark 10-year bond approached an eight-year high last week on concern Europe’s debt crisis was spreading and Portugal would follow Greece and Ireland in seeking European Union aid. Portugal’s 10-year borrowing costs fell at a sale of 1.25 billion euros of bonds yesterday, as European leaders moved to cobble together a package of new measures to stop the contagion. “I don’t anticipate any issues, especially since the Portugal auction went fairly well,” said Pavan Wadhwa, head of European interest-rate strategy at JPMorgan Chase & Co. in London. “The bigger question was Portugal and that came through.” The gap between Spanish and German borrowing costs fell 15 basis points yesterday to 241, the biggest drop since Dec. 2. Spain’s benchmark Ibex 35 stock index rose 5.4 percent, the most since May 10.
EU's New Drive to Stamp Out Euro Region Debt 'Fire' May Fall Short Again. European leaders enter year two of their fight to contain the euro region’s debt woes still struggling to put out the fire. After committing almost $1 trillion, bailing out Greece and Ireland and asserting their determination to save the euro over the past 11 months, policy makers are returning to the drawing board after those previous efforts failed to pacify investors. Their latest plan, elements of which will be debated when finance ministers meet next week, may extend help to Portugal, increase the size of their aid reserves, lower interest rates on bailout loans, and authorize purchases of outstanding bonds. That still may not be enough, said Barton Biggs, managing partner of New York-based hedge fund Traxis Partners LP, who is “short” European securities, betting on their decline. He said officials should issue joint euro-region bonds, a measure opposed by Germany.
Winter Storm Warning Posted for Hawaii as 49 of 50 States Report Some Snow. While the U.S. Northeast digs out from under a blizzard, peaks on the big island of Hawaii are expected to receive about a foot of snow, the National Weather Service reported. Snow was on the ground today in every U.S. state except Florida, covering 71 percent of the land to an average depth of 6.9 inches (18 centimeters), according to the National Oceanic and Atmospheric Administration.
Sinovel Wind Shares Fall in Shanghai Debut on Outlook for Sales Growth. Sinovel Wind Group Co., China’s biggest maker of wind turbines, fell on its first day of trading in Shanghai on concern that rising competition will cut sales growth and the company’s stock is overvalued compared with rivals. The company’s shares dropped 7.1 percent from its offer price to 83.64 yuan as of 11:29 a.m. on the Shanghai Stock Exchange.
Wall Street Journal:
Obama Calls for a More Civil Nation. President Barack Obama called on the nation to resist the temptation to assign blame for a shooting rampage here that may never fully be explained, but to emerge from the tragedy a more thoughtful, civil nation. Concluding a memorial service for the victims of Saturday's violence, Mr. Obama urged: "Rather than pointing fingers or assigning blame, let us use this occasion to expand our moral imaginations, to listen to each other more carefully, to sharpen our instincts for empathy."
Suspect's Downward Spiral. Police Records Show Accused Killer Growing More Erratic Before College Suspension. Students and faculty at Pima Community College feared for their safety as Jared Lee Loughner's increasingly erratic behavior led to a series of encounters with campus police in the eight months before he was suspended from school last fall, police reports show. After he was accused of shooting 20 people last Saturday, school officials described his behavior while at Pima as odd and disruptive. But police reports show in chilling detail that the behavior frightened students and teachers. In February, a rattled student told school officials she feared he had a knife, after Mr. Loughner upset his Advanced Poetry Writing class by making comments such as, "why don't we just strap bombs to babies." In May, an instructor was so worried about physical violence on Mr. Loughner's part that she requested—and received—a police guard outside her class. By June, a dean told the police that students in Mr. Loughner's math class were "afraid of any repercussions that could exist from Loughner being unstable in his actions."
Valero(VLO) to Invest in Ethanol Plant. Oil refiner Valero Energy Corp. plans to invest in one of the first commercial-scale plants to convert wood into ethanol, an unusual vote of confidence by a major oil company in the emerging technology used to produce so-called cellulosic biofuels. The investment may also be a sign that nascent cellulosic-ethanol technology is turning a corner after years of struggling to commercialize new technology, secure financing and drive down operating costs.
Don't Bank on Hedge-Fund Gold Rush. One sign the financial world may be returning to normal: Hedge-fund start-ups in 2010 reached the highest level since the boom, with 715 new funds launched in the first nine months of the year, according to Hedge Fund Research.
Auto Makers Seek Help on Fuel Rules. Auto makers are asking newly empowered House Republicans to help fight a proposal under consideration by the Obama administration to boost fuel-economy standards for new cars and trucks to as high as 62 miles per gallon by 2025.
Prices Soar on Crop Woes. U.S. Cuts Global Grain Supply Outlook; Higher Prices Expected at Grocery Stores.
Biotech Firms Fight Generics. Brand-name drug companies are fighting to weaken a provision of the health overhaul that was designed to open up generic competition in biotechnology medicines and save billions of dollars. The brand-name companies have drawn support from key lawmakers, raising alarms among generics makers who hoped to enter a huge market previously blocked to them.
Australia's Brisbane City Avoids Worst Flood Fears. Flood water in Australia's third-biggest city peaked below feared catastrophic levels on Thursday but Brisbane and other devastated regions faced years of rebuilding and even the threat of fresh floods in the weeks ahead.
Commercial Real Estate Rallies. Forgive me for being ever so slightly optimistic two days in a row, but we're getting some improving numbers on the commercial real estate market, and it's worth noting.
UAW's Image Makes Organizing Mission A Tough Sell. United Auto Workers’ union President Bob King is in a tough spot. He wants to convince foreign carmakers with plants in the United States that “working with the UAW is a smart business decision.” But anybody looking at the carnage of the past few years — tens of thousands of U.S. autoworkers displaced and two American carmakers forced into bankruptcy — has got to be wondering what he’s talking about.
CNN Money:
The Chinese Auto Bubble Threat. The more than 30% sales growth achieved in China in 2010 -- to more than 18 million vehicles -- is probably unsustainable, especially as government officials are moving to put the brakes on car purchases. Beijing is limiting new vehicle registrations to deal with the congestion that can make what reportedly should be a 30-minute ride from the airport to downturn into a two-hour odyssey most days. Experts expect sales growth in China to slow to 10-15% this year. But many automakers are making investments based on the assumption of continued strong sales gains.
Politico:
Court Lets EPA Mess With Texas. For the third time in two months, Texas officials have lost a legal bid to keep the Obama administration from regulating carbon dioxide emissions from power plants in the Lone Star State. Wednesday, a federal appeals court rejected a request from Texas Gov. Rick Perry (R) and state attorney general Greg Abbott to bar the Environmental Protection Agency from taking over the state’s greenhouse gas permitting program.
USA Today:
Company Earnings Forecast to Grow 27.1% in 2010 4th Quarter. The critical fourth-quarter earnings reporting season is underway, and the early signs are that profits aren't merely recovering, but pouring in. Just a handful of companies in the Standard & Poor's 500 index reported their results by Wednesday, but analysts are calling for 27.1% earnings growth. And that could be conservative. "Earnings season could shape up to be ahead of expectations," says Doug Sandler of RiverFront Investment. "People won't be disappointed."
Private Weather Network Will Monitor Greenhouse Gases. A private company announced Wednesday that it's launching its own carbon dioxide measuring network to supplement governmental and academic efforts that have tracked greenhouse gas emissions for decades. The new carbon sensor network, which will augment the NOAA sensors, will be overseen in a joint venture between Washington, D.C.-based Earth Networks (formerly AWS Convergence Technologies) and Scripps. Earth Networks is the parent company of the WeatherBug weather network and desktop application used by consumers, schools, government agencies and TV stations. The new sensors will be another possible contributor to the carbon sensor network, says NOAA's Jim Butler, director of global monitoring at NOAA's Earth System Research Laboratory in Boulder, Colo. "We will be looking at their data and analyzing it," he says.
Reuters:
Shrinking Hedge Fund Harbinger Faces Staff Exits. Prominent hedge fund manager Phil Falcone's $7 billion Harbinger Capital Management has been hit by a series of high profile departures in the past few weeks, according to people familiar with the fund. While some departures were voluntary, others were part of an effort to cut the fund's staff, as the firm's assets have shrunk from a peak of $26.5 billion in 2008, the sources said.
Banks to Meet on AIG(AIG), Recap to Close This Week. Banks will meet in New York City Thursday to make their case for the right to sell the U.S. Treasury's stake in American International Group, three people familiar with the matter said Wednesday.
PC Shipment Growth Lackluster in Q4. Global personal computer shipments crept up only slightly in the fourth quarter, a pair of industry trackers said on Wednesday, hurt by weak consumer holiday demand and competition from Apple's (AAPL) iPad tablet. PC shipments rose 2.7 percent to 92.1 million in the October-December period, research group IDC said. IDC had expected growth of 5.5 percent. Separately, researcher Gartner said fourth-quarter shipments rose 3.1 percent.
Illinois Business Leaders Bristle at Tax Hike Plan. Illinois companies hit by an extended economic downturn say the state's proposed remedy to its own financial crisis - a beefy tax increase - will deplete investment in local businesses, trigger job losses and force companies to leave the state.
US Housing Prices to Bottom in 2011 - Freddie Economist. U.S. housing prices overall are likely to bottom by spring 2011 and begin a gradual rise in 2012, housing lender Freddie Mac's chief economist Frank Nothaft said on Wednesday. "I do think we'll see these housing prices bottom out, maybe by the spring," Nothaft said.
Broker Group Supports Investment Adviser Watchdog. The U.S. brokerage industry's lead lobbying group wants the Securities and Exchange Commission to establish a comparable system of regulation for both brokers and investment advisers.
World Bank: Rich Nations' Growth Lags Need for Jobs. Economic growth in the world's wealthier nations is still too slow to create enough jobs for the tens of millions who lost theirs during the worst global recession since World War Two, the World Bank said on Wednesday. In a report detailing its outlook for 2011, the multilateral lender forecast the global economy would expand 3.3 percent this year, softer than the 3.9 percent expansion seen during 2010.
Financial Times:
List of US Concerns With China Grows. China must reduce unfair subsidies, stop the theft of intellectual property and let its currency appreciate, Tim Geithner has said. The US Treasury secretary, in a speech on Wednesday ahead of next week’s visit by Hu Jintao, Chinese president, widened US concerns about Chinese economic policy well beyond currency, which has been a focus of Capitol Hill’s anger.
Telegraph:
France and Germany Veto Increase in EU Rescue Fund. Mr Barroso said the fund boost was a "precautionary" move, not directed at any one country. The gambit is risky since it may be taken by investors as a sign that Brussels fears imminent contagion to Spain, deemed too big for the current fund. The response in Paris and Berlin was chilly. "We think the fund is big enough," said Francois Baroin, France's budget minister. German Chancellor Angela Merkel said the bail-out mechanism was "nowhere near exhaustion", adding curtly that she did not wish to debate the matter "any further".
DigiTimes:
Broadcom Corp.(BRCM) has expressed interest in acquiring Taiwan-based Ralink Technology Corp. in a possible deal that may reach as much as $800 million, citing chip industry officials.
Yonhap News:
South Korean FM Links N. Korea's Uranium Program to Nuclear Weapons. South Korea's top diplomat called North Korea's uranium enrichment program an attempt to make nuclear weapons in his clearest characterization yet of the newly acknowledged program that has added to the already serious concern about Pyongyang's atomic capabilities.
Evening Recommendations Citigroup:
Reiterated Buy on (OI), target $38 .
Maintained Buy on (BAC), $18 target, Removed from Top Picks Live list.
Reiterated Buy on (VZ), target $39.
Night Trading
Asian equity indices are unch. to +1.0% on average.
Asia Ex-Japan Investment Grade CDS Index 107.0 -2.5 basis points.
Asia Pacific Sovereign CDS Index 108.25 -4.25 basis points.
Initial Jobless Claims for last week are estimated to rise to 410K versus 409K the prior week.
Continuing Claims are estimated to fall to 4088K versus 4103K prior.
The Producer Price Index for December is estimated to rise +.8% versus a +.8% gain in November.
The PPI Ex Food & Energy for December is estimated to rise +.2% versus a +.3% gain in November.
The Trade Deficit for November is estimated at -$40.5B versus -$38.7B in October.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Bernanke speaking and the weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 83.51 -3.21%
European Financial Sector CDS Index 162.86 bps -6.55%
Western Europe Sovereign Debt CDS Index 210.75 bps -2.32%
Emerging Market CDS Index 200.83 -2.65%
2-Year Swap Spread 23.0 -2 bps
TED Spread 16.0 unch.
Economic Gauges:
3-Month T-Bill Yield .14% unch.
Yield Curve 276.0 unch.
China Import Iron Ore Spot $175.40/Metric Tonne +.46%
Citi US Economic Surprise Index +36.40 -.3 point
10-Year TIPS Spread 2.39% -1 bp
Overseas Futures:
Nikkei Futures: Indicating +98 open in Japan
DAX Futures: Indicating +8 open in Germany
Portfolio:
Higher: On gains in my Medical, Ag, Retail and Tech long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades at a new 52-week high, despite ongoing eurozone debt fears, US housing market concerns and emerging market inflation worries. On the positive side, Airline, Education, Homebuilding, Construction, Drug, I-Banking, Bank, Computer Service, Networking, Semi, Computer, Steel, Ag, Oil Service and Alt Energy shares are especially strong, rising more than 1.0%. (XLF) is strongly outperforming again. Copper is gaining +1.41% and Lumber is rebounding +1.2% today. The Italy sovereign cds is falling -6.27% to 228.56 bps, the Russia sovereign cds is declining -3.95% to 139.73 bps, the Spain sovereign cds is falling -4.94% to 333.10 bps, the Portugal sovereign cds is declining -4.17% to 514.52 bps, the Belgium sovereign cds is falling -6.62% to 230.99 bps and the US Muni CDS Index is falling -6.58% to 213.23 bps. Moreover, the European Investment Grade CDS Index is dropping -5.35% to 89.79 bps, which is also a huge positive. The 10-year yield is stable, rising +2 bps to 3.36%, despite today's global equity rally. On the negative side, Coal, Oil Tanker, HMO and Gaming shares are under mild pressure, falling more than .5%. (IYR) has underperformed throughout the day. The UBS-Bloomberg Ag Spot Index is hitting a record high today, rising +2.0%,which is especially worrisome for emerging markets. The Japan sovereign cds is rising another +.15% to 81.59 bps, which is the highest level since July 21st of last year. The Euro Financial Sector CDS Index is pulling back again today, but is still trending higher. The Western Europe Sovereign CDS Index is still just slightly below its record high set on Monday. Investor sentiment gauges are still registering too much short-term complacency, which is also a negative. The broad market continues to trade very well, displaying exceptional resiliency. I expect US stocks to trade modestly higher into the close from current levels on declining eurozone debt angst, diminishing financial sector pessimism, technical buying, more economic optimism, short-covering and less US muni debt angst.
