North American Investment Grade CDS Index 80.80 +1.56%
European Financial Sector CDS Index 130.33 bps -1.37%
Western Europe Sovereign Debt CDS Index 167.44 bps +1.99%
Emerging Market CDS Index 214.38 +2.18%
2-Year Swap Spread 19.0 unch.
TED Spread 18.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .13% -1 bp
Yield Curve 285.0 -3 bps
China Import Iron Ore Spot $186.40/Metric Tonne +.38%
Citi US Economic Surprise Index +63.60 +.2 point
10-Year TIPS Spread 2.34% -2 bps
Overseas Futures:
Nikkei Futures: Indicating -12 open in Japan
DAX Futures: Indicating +6 open in Germany
Portfolio:
Higher: On gains in my Retail, Ag and Tech long positions and emerging markets short 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 lower, despite buyout speculation, mostly positive earnings, fund inflows and lower energy prices. On the positive side, Ag, Computer, Semi, Telecom, Wireless, Restaurant and Road&Rail shares are higher on the day. (IYR) has traded relatively well throughout the day. The US Muni CDS Index is falling another -1.77% to 176.04 bps. Oil is falling -.38% despite euro strength and Mideast tensions. Lumber is rising +1.58%. The 10-year yield is falling -9 bps to 3.65%. On the negative side, Construction, Bank, Computer Service, Steel, Oil Service, Energy, Oil Tanker, Alt Energy and Coal shares are under pressure, falling more than 1.0%.The Hungary sovereign cds is up +3.50% to 284.58 bps, the Brazil sovereign cds is rising +3.05% to 118.17 bps and the Belgium sovereign cds is gaining +2.46% to 164.95 bps. Moreover, the Egypt sovereign cds is rising +4.51% to 354.94 bps. The gasoline crack spread is soaring +9.2% today and is at the highest level since Feb. 2009 despite US gasoline supplies at 20-year high levels. The UBS-Bloomberg Ag Spot Index is rising +1.37%. China's 1-Year Swap Rate is rising +28 bps to the highest level since June 27th, 2008. More emerging market indices are breaking down technically. The major US averages continue to display resilience as the bears are unable to gain meaningful traction with potential negative catalysts, once again. I expect US stocks to trade modestly higher into the close from current levels on earnings optimism, US fund inflows, buyout speculation and falling energy prices.
Deutsche Boerse in Advanced Talks to Purchase NYSE Euronext(NYX).Deutsche Boerse AG is in advanced talks to buy NYSE Euronext in an all-stock transaction that would create the world’s biggest exchange operator. Duncan Niederauer, New York-based NYSE Euronext’s chief executive officer, will hold the same job at the combined company. Frankfurt-based Reto Francioni, CEO of Deutsche Boerse, will be chairman. Deutsche Boerse will own about 59 percent to 60 percent of the joined corporation.
Emerging Markets Stocks Decline for Fifth Day on Inflation, Rate Concerns. Emerging-market stocks declined for a fifth day, heading for its worst losing streak since November, on speculation policy makers will take further steps to curb inflation after China raised borrowing costs yesterday. The MSCI Emerging Markets Index slipped 1.3 percent to 1,112.73 at 11 a.m. in New York. The Jakarta Composite index and South Korea’s Kospi index each lost 1.2 percent. Hungary’s BUX index slipped 1.4 percent and Brazil’s Bovespa declined 1.9 percent. China’s Shanghai Composite index retreated 0.9 percent as exchanges resumed trading following a week-long holiday. “Concerns are evident that inflation issues may jack up interest rates and emerging markets may not be able to enjoy such abundant liquidity,” said Lim Chang Gue, who helps oversee about $21 billion at Samsung Asset Management in Seoul. “There’s some portfolio rebalancing to developed markets where corporate earnings are improving.”
Weber Throws ECB Race Open by Ruling Out Second Bundesbank Term. The race for the European Central Bank’s presidency was thrown wide open as Axel Weber told officials he may not seek a second term as head of Germany’s central bank, casting doubt over his future career plans. Weber told some Bundesbank officials in confidence that he’s not necessarily interested in another eight-year term when his current mandate ends in 2012, said an official who spoke on condition of anonymity. That may also call into question whether he’ll be available to succeed Jean-Claude Trichet as head of the world’s second-most powerful central bank. European Union leaders need to appoint a new ECB chief by the time Trichet’s term expires on Oct. 31 and economists had named Weber as a leading candidate to succeed him.
U.S.-Bound Supertanker Hijacked by Pirates Off Oman. A 1,100-foot supertanker carrying Kuwaiti oil to the U.S. was seized by pirates off eastern Oman today, the first hijacking of a vessel that size since April. The Irene SL has 17 Filipinos, seven Greeks and a Georgian on board, according to a statement on the website of EU Navfor, the European Union’s anti-piracy force. It is carrying 270,266 metric tons of oil destined for the Gulf of Mexico, owner Enesel SA said in an e-mailed statement.
India Sensex Slides to Seven-Month Low Amid GDP Growth Concern. India’s benchmark stock index sank to a seven-month low as investigators widened a corruption probe and Credit Suisse Group AG said investor confidence may be dented by concerns that economic growth will slow. “The market is in a bearish grip,” said Apurva Shah, head of research at Prabhudas Lilladher Pvt. in Mumbai. “High interest rates will surely slow economic growth next year. The corruption probe will slow decision-making in the government.” The Bombay Stock Exchange’s Sensitive Index, or Sensex, lost 182.93, or 1 percent, to 17,592.77 at the 3:30 p.m. close in Mumbai as 22 shares fell while eight rose. The gauge is down 14 percent this year, the second-worst performer after Egypt’s EGX 30 Index.
Wall Street Journal:
Taiwan Says General Spied for China. Taiwan's Defense Ministry said it arrested a military general on suspicion of spying for China in the most high-profile cross-Strait espionage case in decades. Taiwan government officials and some experts said the case highlights a determined effort by China to infiltrate the island's military despite warming economic and political ties between the two sides.
JPMorgan(JPM) to Announce $1.5 Billion Commercial Mortgage-Backed Bond - Source. J.P. Morgan Chase & Co. will announce a $1.5 billion commercial mortgage-backed bond on Wednesday, said a person familiar with the matter. The bond will be sold via the private Rule 144a market. The deal comes right after the biggest commercial-mortgage-backed security to come to market since the financial crisis, a $2.2 billion deal, priced on Tuesday. That deal came via Deutsche Bank AG and UBS AG. Demand was strong enough that its biggest slice was priced to yield just 3.51%.
Ryan Confronts Bernanke Over Fed's Purchases of U.S. Debt, Raises Concerns About the Dollar. House Budget Committee Chairman Paul Ryan challenged Federal Reserve Chairman Ben Bernanke’s policy of so-called quantitative easing – the printing of new U.S. dollars to buy government debt – and raised concerns that a weakened dollar and inflation could cause the loss of the currency’s global reserve status. “There is nothing more insidious that a country can do to its citizens than debase its currency,” Ryan told Bernanke. “Chairman Bernanke: We know you know this. We know that you’re focused and concerned about this. The Fed’s exit strategy and future policy – it will determine how this ends.” Ryan said he believed a “course correction here in Washington is sorely needed.” “Endless borrowing is not a strategy,” he said. “My concern is that the costs of the Fed’s current monetary policy – the money creation and massive balance sheet expansion – will come to outweigh the perceived short-term benefits.” “It is hard to overstate the consequences of getting this wrong. The Dollar is the world’s reserve currency and this has given us tremendous benefits in the global economy,” Ryan said.
Politico:
Jim Webb to Retire; Dems Eye Tim Kaine. First-term Sen. Jim Webb (D-Va.) announced Wednesday that he won’t seek reelection next year, a decision that offers Republicans a key pickup opportunity in a battleground state.
Three Killed in Egypt Desert Clash With Police.Three people were killed and several suffered gunshot wounds in clashes between security forces and about 3,000 protesters in a western province of Egypt, state TV and security sources said on Wednesday. The clashes in New Valley, a province that includes an oasis in Egypt's western desert, erupted on Tuesday and continued into Wednesday, according to security sources.
Kathimerini:
Greece Finance Minister George Papaconstantinou will present an outline of extra fiscal measures for the medium term including at least 2 billion euros in deficit cuts in 2015. The aim is to show markets and European partners that Greece's fiscal overhaul will continue until all its finances are in order.
Cinco Dias:
The Bank of Spain will demand audited versions of banks' and savings banks' core-capital, liquidity and real-estate risk, citing people with knowledge of the matter. The banks, which have just presented details of their real-estate investments and core capital to the country's stock market regulator, must present the required information to the central bank by March 4.
El Pais:
Spain's central government will allow the regions to issue new debt to refinance themselves this year, including regional governments that exceeded the deficit limit, citing the government.
Iranian Press TV:
China signed a $13 billion pact with Iran's Construction and Development of Transportation Infrastructures Co. to build a railroad network in the Middle Eastern country, citing a company statement.
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.
