Egypt Protests Recover Momentum as Suleiman Trumpets Progress on Demands. Tens of thousands of Egyptian protesters filled Cairo’s Tahrir Square, cheering a call by Google Inc. executive Wael Ghonim to stand firm in their demands, as Vice President Omar Suleiman sought to convince demonstrators that the government is serious about moving toward democracy while stabilizing the economy.
3M(MMM) Approves $7 Billion Buyback, Boost Dividend 5%. 3M Co. approved a stock-repurchase plan of as much as $7 billion and increased its quarterly dividend by 5 percent. The dividend will rise to 55 cents a share from 52.5 cents, payable on March 12 to shareholders of record as of Feb. 18, 3M said today in a statement. Based on today’s closing price, the buyback plan would cover about 78.2 million shares, or about 11 percent of those outstanding. The shares rose 92 cents, or 1 percent, to $90.39 at 4:46 p.m. after regular New York Stock Exchange composite trading.
Morgan Stanley(MS) Said to Consider Making Proprietary Group a Client Business. Morgan Stanley, the world’s top merger adviser, may turn its remaining proprietary-trading group into an electronic client-trading unit, according to two people with knowledge of the matter. A final decision hasn’t been made about the group, known as Equity Trading Lab, or ETL, said one of the people, who declined to be named because the talks aren’t public. New York-based Morgan Stanley said last month that it plans to break off its largest proprietary-trading group, Process Driven Trading, or PDT, as an independent advisory firm by the end of 2012. Mary Claire Delaney, a Morgan Stanley spokeswoman, declined to comment.
Wall Street Journal:
FBI Begins of Tunisia Leader's Assets. The Federal Bureau of Investigation has opened a preliminary investigation into ousted Tunisian President Zine al-Abidine Ben Ali and his clan, according to a person familiar with the matter, seeking information on whether he has any assets in the U.S. The FBI is conducting the probe in conjunction with a new Justice Department team that is scouring the financial system for proceeds of theft by foreign officials.
Apple's(AAPL) New iPad in Production. Apple Inc. has started manufacturing a new version of its iPad tablet computer with a built-in camera and faster processor, said people familiar with the matter. The new iPad will be thinner and lighter than the first model, these people said. It will have at least one camera on the front of the device for features like video-conferencing, but the resolution of the display will be similar to the first iPad, these people said. It will also have more memory and a more powerful graphics processor, they said. The new iPad will initially be available through Verizon Wireless and AT&T Inc., but not Sprint Nextel Corp. or T-Mobile USA in the U.S., according to some of the people familiar with the matter.
White House Plans End of Fannie, Freddie. The White House will propose a path to wind down and eventually eliminate Fannie Mae and Freddie Mac and specify a range of options to replace the mortgage companies that have played a central role in the housing market for decades, according to people familiar with the matter. The Obama administration is due to release its proposal for the future of the nation's $10.6 trillion mortgage market as soon as Friday, outlining steps to gradually reduce the government footprint in the mortgage market. Together with federal agencies, Fannie and Freddie have accounted for nine of 10 new loan originations in the past year.
Defense Mergers Opposed by U.S. The Pentagon's procurement chief is expected to deliver a message to Wall Street Wednesday: The Defense Department wants to discourage potential consolidation among top-tier defense contractors.
Job Tax Plan Lands With a Thud. Republicans on Capitol Hill responded with hostility Tuesday to a White House proposal to allow cash-strapped states to raise unemployment-insurance taxes. But in some states struggling with rising debt and empty coffers, officials said the plan should be considered.
Fed Hawks Wary of Bond Buying. The Federal Reserve's inflation hawks stirred Tuesday, signaling caution about the central bank's program to purchase hundreds of billions of dollars of U.S. Treasury bonds as inflation worries again affected bond markets. The Fed still seems likely to complete its plan to purchase $600 billion of government debt by June. It has shown little inclination to even entertain tightening monetary policy by raising interest rates, especially with unemployment still high and domestic inflation below its 2% objective. But the market movements, and the fresh hints of caution from some officials, could signal a changing landscape for the Fed on interest rates in the months ahead.
Inflation Worries Spread. Inflation jitters spread through emerging markets on Tuesday, prompting China's central bank to raise interest rates for the third time in four months amid worries that a drought threatening the country's wheat crop will put further pressure on global food prices. With fireworks still echoing from China's Lunar New Year holiday, its central bank said it is raising rates by one-quarter percentage point. It was just the latest move by an emerging-market government—several of which are deploying a panoply of policies to battle inflation fueled by rising food and commodity prices and growth that is threatening to outstrip their productive capacity. In Brazil, Latin America's largest economy, the government reported Tuesday that inflation is accelerating, leading markets to expect its central bank to increase its overnight rate, already at 11.25%. Few emerging-market countries have a firm grip on the inflation problem. Just last week, John Lipsky, the International Monetary Fund's No. 2, said many emerging economies are running out of excess capacity "and yet most of them still have in place the expansionary…monetary and budgetary policies." The cure is clear, he said. "Everybody is going to need to tighten monetary policy, reduce budgetary stimulus and continue with the process of structural reforms."
Walt Disney(DIS) Earnings Jump, Outstrip Analyst Forecasts. Walt Disneyreported a profit that blew past Wall Street forecasts, aided by a hefty rise in advertising sales at its ESPN cable sports channels and a strong showing from its parks and resorts division. The entertainment conglomerate reported fiscal first-quarter earnings of 68 cents a share excluding one-time items, up from 47 cents a share last year. Sales came in at $10.7 billion, up from $9.739 billion a year ago. Wall Street was looking for a profit of 56 cents a share on revenue of $10.5 billion, according to a consensus estimate compiled by Thomson Reuters.
NY Post:
Apple(AAPL) Could Release TV Next Year. Apple TV is just the beginning. Having revolutionized the way people buy and carry around their tunes, Apple could be setting its sights on the flat-panel TV market, according to a recent report from investment firm Piper Jaffray. As the push towards Internet-ready TVs moves forward, it's believed that the house that Steve Jobs built has invested $3.9 billion in long-term deals with manufacturing facilities and supply sources for LCD displays, suggesting that Apple will release a HDTV by the end of next year. `
Business Insider:
Sinai Nightmare Gets Worse. Hamas plans to follow up Saturday's attack on a Sinai gas pipeline with more large-scale assaults on Israel, according to DEBKAfile. The situation in the Sinai has deteriorated since Egypt's political uprising began two weeks ago. Now militant groups ranging from Somali pirates to embittered Bedouin tribes have free reign on the desert peninsula, which is wedged between Israel, Egypt, Jordan, Saudi Arabia and Hamas-controlled Gaza. DEBKAfile reports that more than 1,000 Hamas extremists in Sinai have teamed up with Al-Qaeda cells and affiliated Islamist groups in the Sinai desert. The groups have reportedly struck a deal for Hamas to arm the Qaeda-affiliates for attacks against Israeli and Egyptian forces along the border.
"There's Some Crap Getting Done": BlackRock(BLK) Scared We Are Going Back to "Ponzi Finance Excesses" of 2007. We have now officially gone full circle. Even as CMBS delinquencies are at all time highs, Wall Street's scramble to generate yield on other people's money (which will be completely lost once the liquidity tsunami ends) is back in 5th gear, as securitizations backed by commercial mortgages are flying off the shelves. It is so bad, that even S&P (!) is questioning the sanity of all those using LP capital to sign the dotted line in pursuit of a few quarters of yield. “There’s some crap getting done,” David Jacob, an executive managing director at credit-rating company S&P, said today during a panel discussion at the American Securitization Forum trade group’s annual meeting in Orlando, Florida.
Allies Press U.S. to Go Slow on Egypt. As the Obama administration gropes for the right response to the uprising in Egypt, it has not lacked for advice from democracy advocates, academics, pundits, even members of the previous administration. But few voices have been as urgent, insistent or persuasive as those of Egypt’s neighbors. Israel, Saudi Arabia, Jordan and the United Arab Emirates have each repeatedly pressed the United States not to cut loose Egypt’s president, Hosni Mubarak, too hastily, or to throw its weight behind the democracy movement in a way that could further destabilize the region, diplomats say. One Middle Eastern envoy said that on a single day, he spent 12 hours on the phone with American officials. There is evidence that the pressure has paid off. On Saturday, just days after suggesting that it wanted immediate change, the administration said it would support an “orderly transition” managed by Vice President Omar Suleiman. Secretary of State Hillary Rodham Clinton said that Mr. Mubarak’s immediate resignation might complicate, rather than clear, Egypt’s path to democracy, given the requirements of Egypt’s Constitution. “Everyone is taking a little breath,” said a diplomat from the region, who spoke on the condition of anonymity because he was discussing private conversations.
GlobeNewswire:
Intuitive Surgical Announces Share Repurchase Program. Intuitive Surgical Inc., the industry leader in surgical robotics, today announced that its board of directors has authorized the company to repurchase up to $400 million of the Company's outstanding common stock. This represents an increase over the $101 million remaining under previous authorizations.
Real Clear Politics:
PC's Failure at Fort Hood. When he was in his residency, studying psychiatry at Walter Reed Army Medical Center from 2003 to 2009, Nidal Hasan gave a lecture in which he defended Osama bin Laden, justified suicide bombers and suggested that Muslim Americans in the military - like him - could be prone to fratricidal attacks against fellow troops. He was "a chronic poor performer," who often failed to show up for work and was often on probation. His program director considered him "very lazy" and "a religious fanatic."
Politico:
U.S. Alienates All Sides in Egypt Conflict. As Egypt’s popular uprising enters its third week, the Obama administration is contemplating the prospect that President Hosni Mubarak or his allies will continue to lead Egypt for the foreseeable future — and that the United States may be in the ironic position of needing to shore up relations with a world leader who’s been a close ally for decades. The White House has sought to walk a tightrope, projecting general support for protesters without humiliating Mubarak, alienating Egypt’s powerful military leaders or unduly alarming other Arab autocrats. But the administration has slipped several times over the past two weeks, and the missteps have pretty uniformly betrayed a bias for Mubarak and the regional stability he brings. The most striking example came when diplomatic envoy Frank Wisner — sent to push Mubarak aside — declared several days later that he felt the Egyptian president should stay. But the improvisational — critics say closer to schizophrenic — nature of U.S. diplomacy during the crisis leaves the administration in the unwelcome position of having to make amends with whichever side emerges from the Egyptian tumult as the governing power. The anti-Mubarak forces clearly will wonder whether the White House ever had their back — but Mubarak and those close to him also will question whether Washington was ready to throw him over the side.
Eric Cantor: GOP Will Defund Health Care Law. House Majority Leader Eric Cantor says the bill to fund the government for the rest of the year will have language to withhold funding from the health care law by the time it passes the House next week. It was a message to the party’s conservative base that, no, Republicanshaven’t forgotten about defunding the health care law. But Cantor still didn’t promise that the defunding language would be in the bill from the beginning — as tea partiers and other opponents of the law want. Instead, Cantor referred to the likelihood that Rep. Denny Rehberg of Montana will offer the defunding amendment on the House floor — noting Rehberg’s “insistence” that the bill should not have any money to implement the law. "I expect to see, one way or the other, the product coming out of the House to speak to that and to preclude any funding to be used for that,” Cantor said.
Reuters:
Buffalo, NY Bans Hydraulic Fracturing.The city of Buffalo, New York, banned the natural gas drilling technique of hydraulic fracturing on Tuesday, a largely symbolic vote that demonstrates concern about potential harm to groundwater from mining an abundant energy source. The city council voted 9-0 to prohibit natural gas extraction including the process known as "fracking" in which chemicals, sand and water are blasted deep into the earth to fracture shale formations and allow gas to escape.
St. Joe(JOE) Considers Sale, Morgan Stanley(MS) Advising. St. Joe Co , a Florida real estate company targeted by famed hedge fund manager David Einhorn, is considering a sale among other options. St. Joe said in a statement on Tuesday that it would consider options, including a revised business plan, operating partnerships, joint ventures, strategic alliances, asset sales, strategic acquisitions and a sale. The company, which had a market capitalization of $2.7 billion as of Tuesday's stock market close, said it was being advised by Morgan Stanley. St. Joe shares were up $3.25, or 11.2 percent, at $32.30 in thin after-hours trading. They were up 13.6 percent earlier in the day.
IMF Warns on Europe Debt Spillover. A possible global economic slowdown stemming from Europe's sovereign debt problems could affect currency and stock markets and weigh heavily on Japan's growth prospects, an International Monetary Fund official said on Wednesday. Euro zone countries are working on a "comprehensive" package of measures to try to resolve their year-long debt crisis, with the aim of completing a deal by the end of March. But a lack of consensus over details of the package means negotiations are progressing slowly. Increased sign of disagreement in Europe could damage confidence in Europe's ability to prevent sovereign debt woes from spreading to other countries, potentially pushing up yields on government debt.
OpenTable(OPEN) Q4 Profit Beats on Higher Reservation Revenue. n">OpenTable Inc, the restaurant reservation platform, posted a fourth-quarter profit that beat estimates, buoyed by a surge in revenue from its reservation solutions segment. For the quarter ended Dec. 31, net income was $5.1 million, or 21 cents per share, compared with $3.1 million, or 13 cents per share, a year ago. Excluding items, the San Francisco-based company earned 33 cents a share. Revenue rose 61 percent to $30.8 million. Reservation revenue rose 80 percent to $15.4 million.
Cerner(CERN) Q4 Profit Beats Market on Strong Bookings. Health information technology company Cerner Corp posted a better-than-expected quarterly profit, helped by strong bookings. For the fourth quarter, the company reported a net income of $70.6 million, or 82 cents a share, compared with $60.5 million, or 71 cents a share, a year ago.
Buffalo Wild Wings(BWLD) Q4 Results Beat Estimates. Buffalo Wild Wings Inc quarterly profit topped market expectations on strong guest traffic and the bar-and-grill chain backed its full-year net earnings growth outlook. The company said it expects net earnings growth of over 18 percent and unit growth of 13 percent for 2011.
Pace of US Equity Buy-Backs Picks Up. US companies have announced share buy-backs at the fastest pace since the fall of Lehman Brothers as companies search for ways to put their record cash holdings to work in a still nascent economic recovery. Buy-backs announced by 24 US groups were $27.3bn last week, topping $26.5bn the previous week and the most in any week since September 2008, according to figures compiled by TrimTabs Investment Research.
Yonhap News:
China and North Korea are expected to sign a deal to jointly mine and process the North's reserves of metals including rare earths and gold, citing a person with knowledge of the deal. Mineral resources including coal make up more than 30% of North Korea's exports through China.
The Chosunilbo:
USFK Chief Explains Threat from N. Korean Special Forces. North Korea's 200,000-strong special forces are divided into 60,000 troops assigned to special missions and 140,000 light infantry troops, the commander of the U.S Forces Korea told South Korean lawmakers Tuesday. Gen. Walter Sharp was speaking in a meeting with the National Assembly's Defense Committee. "The 60,000 troops Sharp referred to are elite special operations squads capable of carrying out highly complicated missions such as the sinking of the South Korean Navy corvette Cheonan, while the 140,000 light infantry troops probably either support the crack units or engage in special operations that we know about such as infiltrating behind enemy lines," said a member of the committee. Another said the light infantry troops are similar to South Korea's special forces and if Sharp's comments are correct "the North probably has 140,000 special forces that are equivalent to ours and 60,000 more soldiers who are capable of even more difficult missions." The lawmaker added, "This means that North Korea's special forces are far more powerful than we thought."
Nikkei:
The Bank of Japan may raise its assessment of the economy at a policy meeting next week, noting signs of improvement in production and exports.
Newsis:
LG Electronics Inc. will raise its home appliance prices in the U.S. because of increasing raw materials costs, and Samsung Electronics Co. may follow the move, citing officials at the two companies it didn't identify.
Financial News:
China may raise interest rates once or twice more this year if inflation pressures remain high, citing analysts including Guo Tianyong, head of the China Banking Research Center at the Central Univ. of Finance and Economics. Monthly consumer price increases may be as high as 6% in February and march, citing Guo.
Evening Recommendations Citigroup:
Reiterated Buy on (OPEN), raised target to $108.
Reiterated Buy on (TWTC), added to Top Picks Live list, target $22.
Reiterated Buy on (CERN), raised estimates, boosted target to $117.
Reiterated Buy on (ILMN), target $85.
Reiterated Buy on (CSGS), target $26.
Night Trading
Asian equity indices are -1.25% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 104.0 unch.
Asia Pacific Sovereign CDS Index 114.50 -.75 basis point.
Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,000,000 barrels versus a +2,594,000 barrel increase the prior week. Distillate supplies are expected to fall by -1,000,000 barrels versus a -1,579,000 decline the prior week. Gasoline supplies are estimated to rise by +2,600,000 barrels versus a +6,154,000 barrel increase the prior week. Finally, Refinery Utilization is expected to fall by -.15% versus a +2.7% gain the prior week.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Bernanke testifying at House Budget Committee, Fed's Sack speaking on QE2, the Fed's Lockhart speaking, $24 Billion 10-Year Treasury Notes Auction, weekly MBA mortgage applications report, Stifel Nicolaus Technology/Communications/Internet Conference, CSFB Financial Services Forum, Cowen Aerospace/Defense Conference, Goldman Ag Biotech Forum, (TEVA) investor meeting and the (IDT) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity shares 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.
North American Investment Grade CDS Index 79.56 -1.52%
European Financial Sector CDS Index 134.58 bps -.46%
Western Europe Sovereign Debt CDS Index 164.17 bps +.41%
Emerging Market CDS Index 210.42 +.14%
2-Year Swap Spread 19.0 -1 bp
TED Spread 17.0 unch.
Economic Gauges:
3-Month T-Bill Yield .14% unch.
Yield Curve 288.0 unch.
China Import Iron Ore Spot $185.70/Metric Tonne unch.
Citi US Economic Surprise Index +63.40 +.2 point
10-Year TIPS Spread 2.36% +1 bp
Overseas Futures:
Nikkei Futures: Indicating +40 open in Japan
DAX Futures: Indicating +2 open in Germany
Portfolio:
Slightly Higher: On gains in my Retail and Tech long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades higher, despite recent equity gains, Mideast tensions, emerging markets inflation worries and rising long-term rates. On the positive side, Hospital, HMO, Homebuilding, Retail, Restaurant, Gaming, Bank and Disk Drive shares are especially strong, rising more than 1.0%. (XLF) has traded well throughout the day, again. The Egypt sovereign cds is falling -1.56% to 339.62 bps and the Saudi sovereign cds is dropping -2.06% to 108.16 bps. Moreover, the US Muni CDS Index is falling -2.66% to 179.20 bps. The UBS-Bloomberg Spot Ag Index is down -.37%, Lumber is gaining +.64% and Copper is rising +.59%. Weekly retail sales rose +2.7% this week versus a +2.3% gain the prior week. On the negative side, Oil Service and Energy shares are under mild pressure, falling more than .75%.Gold is gaining +1.2%. The Spain sovereign cds is up +1.69% to 234.54 bps, the Portugal sovereign cds is rising +1.38% to 424.76 bps and the Greece sovereign cds is gaining +2.92% to 841.44 bps. The Citi Eurozone Economic Surprise Index appears to be rolling over, falling another -16.85% to +38.0. The major US averages continue to trade very well as they slowly build on their recent technical breakouts. However, volume and breadth are lacking on this last push higher. I expect US stocks to trade modestly higher into the close from current levels on earnings optimism, technical buying, US fund inflows, buyout speculation, short-covering, stable energy prices and rising economic optimism.
'Heavy Lifting' to Come as China Leaves Rate Below Inflation. China’s central bank will likely need to increase interest rates further in coming months as the three moves since mid-October leave household wealth being eroded by accelerating inflation. The People’s Bank of China yesterday raised the one-year lending rate by a quarter point to 6.06 percent and the one-year deposit rate an equivalent amount to 3 percent. The deposit rate remains almost 2 percentage points less than the pace of consumer-price gains, giving savers an incentive to buy goods and assets. “There is still a substantial amount of heavy lifting to do in terms of rates -- at this stage of the cycle, the fact that we still have negative real rates is quite alarming,” said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong and a former adviser to Australia’s government.
Lacker Says FOMC Should 'Seriously' Re-Evaluate Stimulus Plan. Federal Reserve Bank of Richmond President Jeffrey Lacker said the quickening U.S. recovery means policy makers need to take “quite seriously” their commitment to review a $600 billion monetary-stimulus program. “The distinct improvement we’ve seen in the economic outlook since the program was initiated suggests taking that re- evaluation quite seriously,” Lacker said today in a speech in Newark, Delaware.
Toyota Review Finds No Electronic Flaws in Runaway Cars. Unintended acceleration in Toyota Motor Corp. vehicles was rooted in mechanical flaws rather than electronic defects, a U.S. investigation found. NASA, the U.S. space agency, and the National Highway Traffic Safety Administration today said a 10-month probe of defects that led to recalls of more than 8 million vehicles worldwide found no electronic causes. Safety advocates and some lawmakers had pointed to electrical faults as a reason for the reports about the world’s largest automaker. “Our conclusion, that Toyota’s problems were mechanical, not electrical, comes after one of the most exhaustive, thorough and intensive research efforts ever undertaken,” U.S. Transportation Secretary Ray LaHood said in prepared remarks. The review may put to rest questions about quality at Toyota, the only major carmaker to post a decline in U.S. sales last year as the overall market gained 11 percent. Toyota sales fell 0.4 percent to 1.76 million vehicles as the company paid $48.8 million in fines to U.S. regulators over the way some of the recalls, the largest by an automaker, were conducted. The U.S. report, which was released today in Washington, found no causes for the unintended acceleration incidents other than sticking accelerator pedals and floor mats that jammed the pedals down. Those were the causes Toyota, based in Toyota City, Japan, had identified for the incidents.
Job Openings in U.S. Decrease to Three-Month Low. Job openings in the U.S. decreased in December to the lowest level in three months, signaling a sustained labor-market recovery will take time to develop. The number of positions waiting to be filled fell by 139,000 to 3.06 million, the fewest since September, the Labor Department said today in Washington. The number of people hired also dropped, as did the number of workers fired.
New York Prepares for Frigid Blast as Cold Grips U.S. A frigid blast driven by winds of 30 miles an hour will send New York City temperatures plunging more than 20 degrees today as arctic cold grips much of the U.S. The temperature in Central Park, which was 40 degrees Fahrenheit (4 Celsius) as of 8 a.m., will hit a low of 14, according to the National Weather Service in Upton, New York.
Gold Futures Rise to Two-Week High as Inflation Concerns Mount. Gold futures climbed to a two-week high on demand for a hedge against rising consumer prices after China increased borrowing costs before a report forecast to show inflation expanded at the fastest pace in 30 months. China joined India, Indonesia, Thailand and South Korea in boosting interest rates this year as Asian policy makers seek to cool the economies leading a global rebound. World food prices rose to a record in January and probably will remain elevated, the United Nations said last week. “People are buying gold as an inflation hedge,” said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. “A more hawkish tone on the part of central banks is going to have people concerned about inflation.” Gold futures for April delivery rose $19.20, or 1.4 percent, to $1,367.40 an ounce at 11:42 a.m. on the Comex in New York. Earlier, the price reached $1,368.70, the highest since Jan. 20. JPMorgan Chase & Co.(JPM), the second-biggest U.S. bank by assets, said it would accept the metal as collateral for trading. The bank “is saying gold is safe enough to use as a store of value,” said Adam Klopfenstein, a senior strategist at Lind- Waldock, a broker in Chicago. “They feel that gold is a stable asset class, and this is going to support a new wave of investors.”
JPMorgan(JPM) Says Bullish Crude Oil Investors Should Consider Taking Profit. Oil investors should consider selling existing bullish positions because prices may decline this week without fresh political tension in North Africa and the Middle East, according to JPMorgan Chase & Co. New York crude futures surged to the highest since October 2008 on Jan. 31, with London’s Brent trading above $100 a barrel, on concern Egyptian unrest would disrupt supplies from the Middle East and unsettle the region’s stability. Signs that protests are easing mean the market may be set for a “notable correction,” the bank said in a report yesterday. Hedge funds raised bullish bets on oil by the most in eight weeks, according to the U.S. Commodity Futures Trading Commission.
McDonald's(MCD) January Same-Store Sales Beat Estimates. McDonald’s Corp., the world’s biggest restaurant chain, reported a 5.3 percent rise in comparable- store sales that topped analysts’ estimates as European sales gained the most in a year. Analysts projected sales would rise 4.5 percent, according to the median of five estimates.
Obama Budget Seeks $53 Billion for High-Speed Rail. President Barack Obama will ask Congress next week to approve a six-year, $53 billion program for construction of a national high-speed and intercity rail network, Vice President Joe Biden said.
Wall Street Journal:
Egyptian Protests Gather Force.Protesters gathered in massive numbers Tuesday evening at central Cairo's Tahrir Square, cheering Wael Ghonim, the Google executive who spoke to the crowd one day after his release. The protesters rejected proposals by the government and renewed their demand for an immediate exit for President Hosni Mubarak.
Obama Budget Proposes Broader Unemployment Taxes. President Barack Obama's budget proposal is expected to give states a way to collect more payroll taxes from businesses, in an effort to replenish the unemployment-insurance program. The plan could cause controversy at a time when the administration is seeking to mend fences with corporate America. The proposal would aim to restock strained state unemployment-insurance trust funds by raising the amount of wages on which companies must pay unemployment taxes to $15,000, more than double the $7,000 in place since 1983. The plan, which would take effect in 2014, could increase payroll taxes by as much as $100 billion over a decade, according to a person involved in its construction.
Home Affordability Returns to Pre-Bubble Levels. Home affordability has returned to pre-housing-bubble levels in a growing number of U.S. markets over the past year, buoyed by several years of sustained price declines, according to data from Moody's Analytics. The data tracks the ratio of median home prices to annual household incomes in 74 housing markets. By that measure, housing affordability at the end of September had returned to or fallen below the average reached between 1989-2003 in 47 of those markets.
Bloomberg Businessweek:
New-Home Recovery Seen as Post-Super Bowl Selling Season Starts. Homebuilder executives and economists predict a post-Super Bowl bounce in demand for residential construction as Americans turn their attention from football to another national pastime: house hunting. The chief executive officers of six of the 10 largest U.S. homebuilders cited the potential of a sales comeback in the spring, traditionally their strongest season, during conference calls in the last four weeks. Housing forecasts from Fannie Mae and the Mortgage Bankers Association show the new-home market will begin a rebound that will last through at least 2012. A revival in demand for new houses after record-low sales in 2010 may bolster a U.S. economy that’s 19 months into a recovery. Residential construction is a key factor in gross domestic product because it requires the manufacturing of home components such as stoves, cement, tile and furnaces. Richard DeKaser, an economist at Boston-based Parthenon Group, said he expects the homebuilding industry will this year make its first positive contribution to GDP since 2005.“The spring market is going to be the first test of the proposition that there’s an underlying improvement in new-home fundamentals,” DeKaser said in an interview.
CNBC:
Wiki Cable: China Used 'Hostile' Audit to Scour Citi(C) Books. China used its regulatory powers to scour the books of Citibank Shanghai in a "hostile" and "extraordinarily intrusive" 2007 audit that appeared primarily aimed at controlling Citi's growth and uncovering its secrets to success, the bank's top China executive at the time told U.S. officials. The Citi case underscores the high level of scrutiny that foreign companies face in China, particularly in the financial sector, and it provides a window into complaints from U.S. companies and trade negotiators that China conducts intellectual property theft and forced technology transfers.
MarketWatch:
Fed's Fisher Says Would Dissent From Any New QE. Richard Fisher, the president of the Dallas Federal Reserve Bank vowed on Tuesday to vote against any additional bond-buying program once the current $600 billion purchase plan expires in June. "It is hard for me to envision a scenario where I would not use my voting position this year to formally dissent should the FOMC recommend another tranche of monetary accommodation," Fisher said in a speech in Dallas. Fisher said he also expects to be at the forefront of the effort to push the Fed to trim back its Treasury holdings and tighten policy at the "earliest sign" that inflation pressures are moving out of the commodity markets and into the general price stream.
Qualcomm(QCOM) Gets Boost From Verizon(VZ) iPhone. Shares of Qualcomm Inc. set a fresh two-year high Tuesday on news that one of the company’s chipsets will occupy a key slot in the upcoming Verizon iPhone, which is set to go on sale later this week.
New York Post:
FDIC's Rules on Pay. Washington is finally ready to clamp down on bloated Wall Street pay with new rules -- but it could cost companies a fortune just to figure it out. The Federal Deposit Insurance Corp., along with six other regulatory agencies, took the wraps off of a 77-page blueprint for reining in runaway pay, particularly at big financial firms, in hopes of avoiding another financial meltdown.
GM(GM) Hourly Workers Expect Biggest Bonuses Ever. General Motors Co.'s hourly workers can expect some of the largest profit-sharing checks ever, when the automaker pays bonuses for the money earned in 2010, a top union official said Monday. United Auto Workers' Vice President Joe Ashton, who oversees the union's labor relations with GM, said the bonuses are likely to top the average $1,775 workers got for 1999, the company's biggest payout to date.
Undermining Allies. While everyone's attention seems to be focused on the crisis in Egypt, a bombshell revelation about the administration's foreign policy in Europe has largely gone unnoticed. The British newspaper The Telegraph has reported that part of the price which President Obama paid to get Russia to sign the START treaty, limiting nuclear arms, was revealing to the Russians the hitherto secret size of the British nuclear arsenal. This information came from the latest WikiLeaks documents.
Reuters:
Bernstein Favors US Small Cap Stocks to Hot "BRICs". U.S. small-company stocks promise far greater returns than the emerging market equities, former Merrill Lynch investment strategist Richard Bernstein said on Tuesday. Bernstein, who has reversed his views on the market since 2009, when he was significantly more pessimistic about the economy and U.S. stocks, told an audience of investment managers and financial advisers that the nearly two-year long bull market in U.S. equities has room to run. "The U.S. arguably may be the world's most improved economy," he said, "and U.S. small cap growth and value is the greatest growth story in the world."
Subprime Metals. It’s a surprising (and rather rare) divergence in the South African rand’s performance compared to its hard commodity currency counterpart, the Australian dollar. Given that foreign flows strongly propped up the ZAR in 2010, this might be another penny dropping on inflation in emerging markets, Citi say. But it’s Metals Markets Anomaly No.2 — especially the analogy used to explain it — that may prove more contentious. Copper inventories are plagued by truly weak supply. Other industrial metals aren’t, despite what rising prices might say. According to Citi:
Focus Money:
German inflation may increase to as much as 4% next year and remain at that level for "several years," Thomas Straubhaar, head of the Hamburg-based Hwwi economic institute, said in an interview. Inflation may "clearly exceed" 2% in the second half of 2011, Straubhaar said. Higher wage demands are "justified" and the increases could average 3%, citing the interview.
