North American Investment Grade CDS Index 81.18 -1.30%
European Financial Sector CDS Index 130.33 bps -.81%
Western Europe Sovereign Debt CDS Index 170.33 bps +1.49%
Emerging Market CDS Index 221.22 +1.44%
2-Year Swap Spread 120.0 +1 bp
TED Spread 20.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .11% -1 bp
Yield Curve 280.0 -5 bps
China Import Iron Ore Spot $188.90/Metric Tonne +.48%
Citi US Economic Surprise Index +67.10 +.5 point
10-Year TIPS Spread 2.31% -3 bps
Overseas Futures:
Nikkei Futures: Indicating +120 open in Japan
DAX Futures: Indicating +21 open in Germany
Portfolio:
Higher: On gains in my Retail, Ag, Tech and Medical long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades at a new multi-year high, despite recent equity gains, ongoing Mideast unrest/uncertainty, emerging markets inflation fears and rising eurozone debt angst. On the positive side, Airline, Road&Rail, Gaming, Restaurant, Homebuilding, Construction, HMO, Hospital, Medical, I-Banking, Bank, Networking, Paper, Steel, Ag and Alt Energy shares are especially strong, rising more than 1.0%. The Transports are very strong again today. (XLF) is also strongly outperforming. The Egypt sovereign cds is falling -4.66% to 321.89 bps. Oil is falling -1.4% and copper is rising +.25%. Moreover, the UBS-Bloomberg Spot Ag Index is falling -.74%. The 10-year yield is falling -5 bps to 3.64%. The Citi US Economic Surprise Index is rising another +.75% and remains at the highest level since Sept. 1, 2009. On the negative side, Drug and Wireless shares are under mild pressure, falling more than .5%.The Greece sovereign cds is up +2.29% to 861.47 bps, the Italy sovereign cds is gaining +2.21% to 177.41 bps and the Spain sovereign cds is rising +2.11% to 241.05 bps. Moreover, the Israeli sovereign cds is rising +3.79% to 148.16 bps, which is the highest since July 21st, 2009. The Emerging Markets CDS Index is rising +1.44% today despite a rally in emerging market stocks on the Egypt news. Many growth stocks continue to massively outperform the major averages. The action in shares of (PNRA) should give the bears further pause. One of my longs, (ISRG), is breaking out of its recent consolidation. I still see substantial upside in the shares from current levels over the intermediate-long term. The major US averages are continuing their slow grind higher, despite potential headwinds, which is a major positive. I expect US stocks to trade mixed-to-higher into the close from current levels on earnings optimism, US fund inflows, buyout speculation, lower long-term rates, economic optimism, less financial sector pessimism and falling energy prices.
Mubarak Hands Power to Egypt's Military. Hosni Mubarak stepped down as president of Egypt and handed power to the military, bowing to the demands of protesters who have occupied central Cairo for the past 18 days demanding an end to his 30-year rule. “Mubarak has decided to relinquish the office of the presidency,” said Vice President Omar Suleiman in a statement on state television late today. “He has instructed the Supreme Council of the armed forces to take over the affairs of the country.”
Egypt ETFs Surge, Credit Default Swaps Fall as Mubarak Resigns. Egypt’s default risk fell and shares rallied as Hosni Mubarak stepped down as the country’s president and handed power to the military, bowing to the demands of protesters. The cost of insuring Egyptian government debt fell 25 basis points to 312, according to CMA prices for credit-default swaps, tumbling from as high as 379 basis points earlier today. The Market Vectors Egypt Index ETF, an exchange-traded fund that holds Egyptian shares, gained 6.7 percent in New York, the most since Jan. 31. Egypt’s 5.75 percent dollar bond due 2020 rebounded, cutting the yield by 13 basis points at 6.37 percent, data compiled by Bloomberg as of 5:06 p.m. in London show. “It should be positive for Egyptian assets but that said there is still a lot of uncertainty about who will take over and how things will pan out over the coming months,” said Nigel Rendell, emerging-market strategist at RBC Capital in London. Market gains are “a knee-jerk reaction to the fact that Mubarak has stepped down without further military action or further deaths,” he said.
Oil Declines to 10-Week Low After Mubarak Hands Power to Egypt's Military. Oil fell to a 10-week low in New York after Egyptian President Hosni Mubarak stepped down and handed power to the military, reducing concern that crude shipments from the Middle East will be disrupted. Oil dropped as much as 1.9 percent after Vice President Omar Suleiman made the announcement on state television today. Crude for March delivery declined $1.36, or 1.6 percent, to $85.37 a barrel at 12:30 p.m. on the New York Mercantile Exchange. Oil touched $85.10, the lowest intraday price since Dec. 1. Futures are down 4.1 percent this week and are 13 percent higher than a year ago.
Consumer Sentiment in U.S. Increases to Eight-Month High. Consumer confidence rose in February to the highest level in eight months as decreasing unemployment lifted Americans’ spirits. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for the month climbed to 75.1 from 74.2 in January, in line with the median forecast of economists surveyed by Bloomberg News. The sentiment data showed households’ perceptions of the economy and job market turned positive this month for the first time in seven years, signaling consumer spending may keep contributing to the expansion. The sentiment measure’s current conditions gauge, which reflects Americans’ perceptions of their financial situation and whether they consider it a good time to buy big-ticket items like cars, increased to 86.8, the highest since January 2008, from 81.8 the prior month. The index of consumer expectations six months from now decreased to 67.6 from 69.3. Nonetheless, Americans grew more optimistic about job prospects. The report showed the share of Americans who expected unemployment to fall over the next 12 months exceeded the share of those who projected an increase by 8 points, the first positive reading in seven years and highest level since 1984, according to economists at Credit Suisse in New York.
Level Global Closes Firm, Returns Capital to Investors. Level Global Investors LP, one of four hedge funds raided by the FBI in November as part of a federal insider-trading probe, decided to close and return cash to clients, according to a letter sent to investors. The $4 billion firm, co-founded by David Ganek and Anthony Chiasson in 2003, said it expects to sell all of its holdings by the end of March. Ganek and Chiasson are alumni of Steven Cohen’s Stamford, Connecticut-based SAC Capital Advisors LLC. “Unfortunately the ongoing government investigation presents significant challenges to maintaining our collective focus,” Ganek said in a letter today.
MGIC(MTG), Radian(RDN) Advance as Geithner Aims to Curtail FHA. MGIC Investment Corp. and Radian Group Inc. led mortgage insurers higher after U.S. Treasury Secretary Timothy F. Geithner called for limiting the role of government-backed competitors. MGIC, the largest private U.S. mortgage insurer, jumped 11 percent, the most in five months, to $10.16 at 11:07 a.m. in New York Stock Exchange composite trading. No. 2 Radian, based in Philadelphia, surged 13 percent, to $8.01, the biggest advance since November. “We will encourage Fannie Mae and Freddie Mac to pursue additional credit-loss protection from private insurers,” according to a report today from Geithner and Housing and Urban Development Secretary Shaun Donovan.
Dry-Bulk Freight Rates May Rebound, Deutsche Bank Says. Rates to haul coal, iron ore and other dry-bulk commodities may be set to rebound as activity quickens after a weeklong holiday in China, Deutsche Bank AG said. The Baltic Dry Index of commodity-shipping costs gained 13 percent this week, the most since August, to 1,178 points after sliding on Feb. 4 to the lowest level since January 2009. It’s still down 34 percent this year.
India's Industrial Production Increases at the Slowest Pace in 20 Months. India’s industrial output grew at the weakest pace in 20 months, adding to concern the economy may slow after the steepest interest-rate increases in Asia. Output at factories, utilities and mines rose 1.6 percent in December from a year earlier after a revised 3.62 percent gain in November, the government said in a statement in New Delhi today. The median estimate of 27 economists in a Bloomberg News survey was for a 2 percent increase. Concern price gains and costlier credit will damage purchasing power has spurred a 15 percent slump in the Bombay Stock Exchange’s Sensitive Index this year, the region’s worst fall. “Higher inflation and borrowing costs will have a damping effect on the demand going forward” said Ramya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore.
Greece Joins Italy in Objecting to Proposed EU Debt-Reduction Benchmarks. Greece joined Italy in objecting to annual numerical debt-reduction targets in a fresh challenge to the German-led drive for tougher economic safeguards to underpin the euro. Greece, the first deficit-riddled euro country to fall back on financial aid, says the proposed rule would force it to make impossibly large cuts once its support package runs out in 2013, according to a draft of European Union legislation. “All member states except two already accepted the proposal,” said an EU briefing note obtained by Bloomberg News before next week’s debate among finance ministers. “Italy and Greece have a reserve on the numerical benchmark.” Greece or Italy alone could veto the rule, undercutting the tougher enforcement demanded by Germany as a condition for beefing up the 750 billion-euro ($1 trillion) rescue fund for distressed states.
Weber to Leave Bundesbank in April, Throws ECB Race Open. Bundesbank President Axel Weber resigned, ending three days of confusion and opening the field for candidates from Finland to Italy to become the next chief of the European Central Bank. Weber, 53, “expressed the wish to resign” and will leave office on April 30 with a successor to be named during the next week, Steffen Seibert, a German government spokesman, said today after Weber met in Berlin with Chancellor Angela Merkel. Weber is leaving for “personal reasons” after deciding to step down on Feb. 8 and then being asked by Merkel to postpone the announcement, the Bundesbank said.
ConocoPhillips(COP) Boost Dividend, Adds to Share Buyback. ConocoPhillips, the third-largest U.S. oil company, boosted its quarterly dividend and spending plan for the year while adding as much as $10 billion in share buybacks. The share repurchases are in addition to an existing $5 billion buyback program which has $1 billion remaining available, the Houston-based company said in a statement today. Shareholders of record as of Feb. 22 will receive a quarterly dividend of 66 cents per share, a 20 percent increase, payable March 1. The company also plans to spend $13.5 billion this year to drill wells, build oil platforms and repair refineries, a 21 percent increase over its 2010 capital-spending plan, according to a separate statement released today. About 90 percent of this year’s spending will be devoted to finding and developing oil and natural-gas fields.
Nokia(NOK) Joins Forces With Microsoft(MSFT) to Challenge Apple(AAPL), Google(GOOG); Shares Fall. Nokia Oyj, the world’s biggest maker of mobile phones, said it’s forming a software partnership with Microsoft Corp., betting that together the two companies can challenge Google Inc. and Apple Inc. Nokia fell 14 percent, the biggest drop in seven months, after its plan to make Microsoft’s Windows its primary software was seen as a sign of the extent of its troubles in taking on Apple’s iOS and Google’s Android platforms.
Wall Street Journal:
Egyptians Celebrate Mubarak's Resignation. Egyptian President Hosni Mubarak succumbed to the demands of hundreds of thousands of his compatriots Friday and resigned from office, bringing to an end three decades of autocratic rule. The announcement was delivered by Vice President Omar Suleiman in a brief statement on state television. Mr. Mubarak delegated control of the country's affairs to Egypt's army, Mr. Suleiman said. "Because of the current circumstances in the country the president, Hosni Mubarak, has decided to step down, and the higher command of the army is taking control of the country," he said. The streets around central Cairo's Tahrir Square erupted in jubilation.
Fannie, Freddie Phaseout Proposed. The Obama administration unveiled a proposal Friday for winding down mortgage giants Fannie Mae and Freddie Mac, spelling out three options for what could take their place and setting the stage for a debate over the nation's $10.6 trillion mortgage market. The steps, outlined in a "white paper," are likely to mean higher borrowing costs and more-limited access to home loans for consumers. Treasury Secretary Timothy Geithner said establishing a new system could take five to seven years. "This is a plan for fundamental reform of the housing market," Mr. Geithner said, cautioning that "we're going to proceed on this path of reform very carefully."
Business Insider:
Ahmadinejad Leads A Gigantic Pro-Egypt, Anti-American Rally. It's the 32nd anniversary of the Iranian revolution. Massive crowds in Tehran are calling for Egypt and other Islamic nations in protest to follow their path, according to the AFP. Ahmadinejad said in a speech: "We will soon see a new Middle East materialising without America and the Zionist regime and there will be no room for world arrogance in it." He told America to stop propping up Israel: "Come and take away the Zionist regime which is the source of all crimes... take it away and liberate the region. Free the region and give it to the people and take this regime, which is the child of Satan, out."
Jordan Islamists Say Mubarak's Fate "Should Be A Lesson To All Arab Regimes" As Switzerland Freezes Former President's Assets. Barely an hour has passed since Mubarak's departure, and the religious tensions in the middle east are already starting to flare up. First up: the Jordan Muslim Brotherhood has immediately taken advantage of a vacated podium and said that what happened in Egypt should be a lesson to all Arabs. While hopefully nobody will be able to hijack the success of the Egyptian people, one wonders just how heavily the various Middle Eastern regime are sweating tonight...
Iranian Opposition Leader Mehdi Karroubi Placed Under House Arrest. One of Iran's most prominent opposition leaders was placed under house arrest Thursday, with security agents posted at the entrance saying they would stay there until a possible anti-government protest has passed, the cleric's Web site reported. "Only his wife is being allowed into the house," Sahamnews.org said. "This probably has to do with the protest scheduled for Monday, Feb. 14." But the measure also appeared intended to prevent Mehdi Karroubi, a former head of parliament who has become highly critical of Iran's leaders, from participating in a state-backed rally Friday to celebrate the 32nd anniversary of the country's Islamic revolution.
Pittsburgh Business Times:
Steel Prices Rise as Demand to Increase. Reports of an expected 10 percent increase in steel demand in the United States this year sent some steel company stocks higher Thursday, the same day AK Steel(AKS) announced a price increase.
Micron(MU) Upbeat on DRAM, NAND Memory Prices.Micron Technology, the top U.S. maker of memory chips for computers, sees favorable trends in pricing as small players are forced out of the market and as mobile gadgets help drive demand.
Developed Markets Best Emerging in Fund Flows - EPFR. Investors hunting for higher returns on their cash put a record net $1.4 billion extra into high yield bond funds for the week ended Feb. 9, while the rotation into developed market stocks continued, data from EPFR Global showed on Friday. All equity funds tracked by the Cambridge, Massachusetts-based firm showed net inflows of $2.8 billion while all bond funds combined had net outflows of $186 million. In the equity space, funds focused on the United States, Europe, Global and Japan took in a net $6 billion or so.However there was a net $3 billion pulled out of emerging market equities as well as $351 million from Pacific equity funds.
Europe may face renewed financial turmoil in 2011, UBS AG Chief Economist Andreas Hoefert said.
Berlingske Tidende:
A majority of Danes would vote against joining Europe's single currency bloc if a referendum were held tomorrow, citing a Gallup Denmark poll. 50% of respondents said they would reject euro adoption, compared with 41% in favor of the currency switch, the poll showed.
DigiTimes:
Samsung, Apple(AAPL) to See Notebook Shipments Remain Strong in 1Q11. Samsung has been performing better than other brands by taking up deliveries from the suppliers, the sources noted, adding that Apple reportedly is revising upward its orders with the volume of some hot-selling models being doubled. Affected by Intel's defective chips, Hewlett-Packard(HPQ) may ship 10 million notebooks in the first quarter of 2011 compared to 11.13 million shipped in the previous quarter, said the sources.
Mubarak Defiance of Ouster Calls Angers Protesters. Egyptian President Hosni Mubarak defied calls for his immediate resignation, agreeing only to delegate powers to his deputy, as thousands crammed into central Cairo demanding an end to his 30-year rule. Mubarak, 82, reiterated he intends to stay on as president until elections in September while day-to-day powers go to Vice President Omar Suleiman. President Barack Obama, in a statement issued after Mubarak spoke, said Egyptians were left “unconvinced” that the regime is “serious about a genuine transition to democracy.” Mubarak’s broadcast announcement was loudly rejected by the tens of thousands of opponents in Tahrir Square in expectation that he was preparing to quit. “Down with Mubarak,” they chanted, and many waved their shoes in a sign of disrespect. “I am not happy with this, he didn’t say anything new,” said Ahmed Ali, a demonstrator. “I won’t leave here.” With Friday prayers approaching, huge new protests were planned. The United Nations says has already resulted in 300 deaths over the past two weeks. Strikes by state workers and others have been spreading. Protesters braced for the possibility that the military will crack down. “We are here and willing to give more blood if this is what it takes to get rid of him and his thugs,” Haytham Saqr, 31, one of the protesters at Tahrir, said. “Demonstrations are continuing and plans of escalation are being discussed.”
Muslim Brotherhood's Katatni Says Mubarak Speech 'Not Enough'. Egyptian President Hosni Mubarak’s speech was not enough to end protests which will continue until his ouster, Mohamed Saad El-Katatni, a leader of the Muslim Brotherhood movement said today.
Oil Gains on Supply Concern After Mubarak Defies Call to Resign. Oil rose after Egyptian President Hosni Mubarak defied calls for his resignation, agreeing only to delegate some authority to his deputy, prompting concern supplies may be disrupted amid further unrest. Futures climbed as much as 1.2 percent in New York after Mubarak, 82, reiterated late yesterday he intends to stay on as president until elections in September, while handing powers to Vice President Omar Suleiman in a bid to placate his opponents. “The big risk is of contagion to the large oil-producing countries like Saudi Arabia or Iran in the region,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. The March contract gained as much as $1.04 to $87.77 a barrel in electronic trading on the New York Mercantile Exchange, and was at $87.54 at 1:04 p.m. Sydney time. “What we don’t know is if this is 1979 Iran all over again or if it’s completely different,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.
Goldman Sachs(GS) Former Chief Whitehead Says NYSE Deal 'An Insult'. John C. Whitehead isn’t celebrating the 219-year-old New York Stock Exchange’s plan to be acquired by Germany’s 18-year-old Deutsche Boerse AG. “I think it’s a terrible idea and I hope it can be stopped,” Whitehead, the 88-year-old former co-chairman of Goldman Sachs Group Inc., said in an interview yesterday. “It would be an insult to New York City, and New York State, and indeed to all America.” The erstwhile U.S. deputy secretary of state, NYSE director and Lower Manhattan Development Corp. chairman said his experience gives him the credibility to speak out against the potential takeover. “I speak out rarely, and this is one time when I can’t hold myself back,” he said, adding that the exchange is an “important symbol” of American capitalism and of New York City’s status as a global financial center. “I think of it as a holy institution,” he said.
China Adjusts Reserve Ratio for Some Small Banks, Securities Journal Says. China’s central bank imposed differentiated reserve requirement ratios on some of the nation’s small and medium-sized lenders after January loan growth surged, the official China Securities Journal reported today, citing an unidentified person. The adjustment, which mainly affected city commercial banks, was made after the Chinese New Year holiday that ended Feb. 8, according to the newspaper, an affiliate of the state-run Xinhua news agency.
Wheat's Rally to Fuel Gains in Rice, Zeigler Predicts. The price of rice, the staple food for half the world, may advance as wheat’s rally drives consumers to seek alternatives, according to Robert Zeigler, director general of the International Rice Research Institute. “Rice typically tracks wheat increases,” Zeigler said in an interview on Bloomberg Television today. “Wheat prices started to spike in last July, and rice prices followed them up,” Zeigler said, describing it as a “follow-on effect.”
Copper Advances for a Second Day on Supply Shortage Expectation. Copper climbed for a second day from London to Shanghai on expectation that supplies will not keep pace with demand as mining companies struggle to boost output. Tin jumped to a record. Three-month copper on the London Metal Exchange rose as much as 1.1 percent to $10,045 a metric ton and was at $10,011.25 at 10:04 a.m. in Singapore.
Buffett: Goldman(GS) Buy Was Bet U.S. Would 'Leverage Up'. Billionaire Warren Buffett said his $5 billion investment in Goldman Sachs Group Inc. at the depths of the financial crisis was a wager that Federal Reserve Chairman Ben S. Bernanke and then-Treasury Department Secretary Henry Paulson would take on debt to prop up the economy. Buffett’s Berkshire Hathaway Inc. bought preferred stock in New York-based Goldman Sachs in 2008 after the collapse of rival securities firm Lehman Brothers Holdings Inc. Paulson had left the chairmanship of Goldman Sachs in 2006 to join the administration of President George W. Bush. Berkshire gets a 10 percent annual dividend on the investment and received warrants to buy $5 billion in common stock with a strike price of $115 per share. Goldman Sachs traded for more than $165 a share today on the New York Stock Exchange, compared with $84.39 at the end of 2008.
Zoellick Says Rising Food Prices Squeeze Neediest. World Bank President Robert Zoellick said today there is “no doubt” that food prices are rising in Egypt and elsewhere, increasing pressure on the world’s neediest people. “There’s no doubt that we’re seeing rising food prices just as we saw a couple of years ago and it puts stress on the most vulnerable,” Zoellick said in an interview with Bloomberg television. “People often in developing countries spend half or three quarters of their income in food, so they’ve got little margin.” World food prices rose to a record in January on higher dairy, sugar and cereal costs and probably will remain elevated, the United Nations said earlier this month. An index of 55 food commodities climbed 3.4 percent from December to 231 points, the seventh straight increase.
GM(GM), Chrysler Salaried Workers' Bonuses Said to Reach as Much as 50% of Pay. General Motors Co. and Chrysler Group LLC, which each received government-funded bailouts, may award some managers bonuses of as much as 50 percent of their salary, said three people familiar with the plans. GM plans to pay 26,000 U.S. employees bonuses as high as 50 percent, with most managers receiving about 15 percent to 20 percent of their annual salary, said one of the people, who asked not to be named revealing internal plans. The payouts come as GM, Chrysler and Ford Motor Co. prepare for contract talks this year with the United Auto Workers, which is seeking a share of the industry’s growing prosperity. Ford, the only U.S. automaker to avoid bankruptcy in 2009, is expected to pay bonuses equal to 10 percent or more of base pay to some salaried staff, said a person familiar with the plan. “The union is going to be very angry about this,” said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Massachusetts. “If these kinds of bonuses are paid to salaried workers, then the union’s demands will increase, knowing management can’t claim an inability to pay.” GM reorganized in bankruptcy in 2009 with $49.5 billion in government aid, while Chrysler got $12.5 billion in assistance for its reorganization that year. Each is subject to pay restrictions after receiving funding from the U.S. government’s Troubled Asset Relief Program, which also aided banks. “Politically, it’s a bad thing to do,” Chaison said of the bonuses. “These companies are still not on solid ground yet, and it makes the auto companies look like banks” that distributed large bonuses. UAW President Bob King has said he aims to recover some of the $7,000 to $30,000 in concessions each worker gave up since 2005 to help the U.S. automakers survive. The union surrendered raises, bonuses and cost-of-living adjustments. The UAW also agreed to a two-tier wage system in which new hires earn about $14 an hour, half the amount paid to senior production workers. “All the sacrifices that our members made to turn these companies around were part of the process that’s really led to this amazing turnaround,” King said in an interview last month. “We want our membership to share in a very meaningful way in the upside of these companies.”
Dimon Calls Fannie, Freddie 'Biggest Disasters of All Time'. JPMorgan Chase & Co.(JPM) Chief Executive Officer Jamie Dimon said government-sponsored mortgage companies Fannie Mae and Freddie Macwere “the biggest disasters of all time” and a leading cause of the U.S. financial crisis. “That one was an accident waiting to happen,” Dimon said in an Oct. 20, 2010, interview with the Financial Crisis Inquiry Commission. The congressional panel yesterday released audio files of interviews gathered during its 18-month investigation into the causes of the crisis. “We all knew about it, we all worried about it, no one did anything about it,” Dimon, 54, told investigators. Dimon said lax lending standards across the industry and excessive leverage and risk-taking by banks helped cause the crisis. “You kind of got sucked into this whole sense of security because there were no losses,” Dimon said. “I would also say people lied. There was more and more of that in a frothy market.”
Buffett Tells FCIC It's Powerless to Stop 'Too Big to Fail'. Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc.(BRK/A), told the Financial Crisis Inquiry Commission that taxpayers will always be on the hook for collapses at the biggest U.S. companies. “You will always have institutions that are too big to fail, and sometimes they will fail,” Buffett, 80, told the FCIC in a May 26 interview, according to a recording released by the panel yesterday. “We still have them now. We’ll have them after your commission report.”
Wall Street Journal:
Mubarak Deepens Crisis. Egyptian President Hosni Mubarak handed power to his vice president but retained his title, a half-measure that confused observers, angered opposition leaders and provoked an uproar from hundreds of thousands of protesters massed in the center of the country's capital. The move sets up another conflict with the opposition movement, which has called on supporters to gather for a huge protest Friday. Expectations that the president would resign had built through the day, and the immediate reaction to the speech was anger, with protesters chanting "Leave, leave." An Army officer using a loudspeaker tried to calm protesters. "Let's save our energy for tomorrow," a man screamed to the crowd. "Go home and sleep, because tomorrow will be the day of judgment." The defiant tone taken by Mr. Mubarak—and widespread confusion about the meaning of his speech—left the Obama administration scrambling to devise its next steps in a crisis that appears out of its control.
Crisis Puts White House in Disarray. Egyptian President Mubarak's Refusal to Step Down Signals a Loss of Western Influence; Sense of 'Disbelief' After Speech. The defiant tone taken by Egyptian President Hosni Mubarak—and widespread confusion about the meaning of his speech—had White House officials stumbling for their next step in a crisis that was spinning out of their control.
Apple's(AAPL) Jobs Calls Shots From Home. Three weeks into a medical leave he took "to focus on my health," Apple Inc. Chief Executive Steve Jobs is staying closely involved in the company's strategic decisions and product development, according to people familiar with the matter. The 55-year-old Mr. Jobs, whose ailment hasn't been disclosed, has been taking business meetings at home and on the phone, these people said. He also has been seen on Apple's Cupertino, Calif., campus and in public in Palo Alto, Calif., with a company executive, said people familiar with the matter. Among products he is continuing to work on are the next version of the iPad tablet computer, expected out in the next couple of months, and a new iPhone, expected to be released this summer, said two of these people. Inside Apple, meanwhile, day-to-day operations continue nearly unchanged under Chief Operating Officer Tim Cook, said people inside the company and at its business partners. While some people at Apple said there was concern about Apple's future during Mr. Jobs's previous leave, Apple stock rose 78% while Mr. Cook steered the company through his nearly six-month absence. Mr. Cook's performance then has made Apple employees more secure about his taking the reins again, said people familiar with the matter. One of these people said Mr. Jobs often worked from home even before his leave. Apple's business has been gaining momentum, and people inside the company are enthusiastic about the new products and services they are working on, said the people familiar with the matter.
Panel Likely to Recommend Reversing Huawei Deal. A U.S. government panel is poised to recommend that the president unravel an acquisition made by China's Huawei Technologies Co., after the Pentagon sought review of the deal, people familiar with the matter said. The Committee on Foreign Investment in the United States is reviewing the telecommunications-equipment maker's $2 million deal last May to buy the assets of 3Leaf Systems, a Bay Area developer of technology that lets collections of server computers work together as a more powerful machine.
A Wells Fargo(WFC) Exit Puzzles. The abrupt departure of Wells Fargo & Co. Chief Financial Officer Howard Atkins and the unusual terms of the separation remain largely unexplained, even to senior executives and bank regulators. The circumstances surrounding Mr. Atkins's Tuesday departure were as puzzling to employees and regulators as they were for analysts and investors. In a news release about Mr. Atkins's exit, the company said only that it had nothing to do with the company's "financial condition or financial reporting."
Rise in Rates Is Headwind for Housing. U.S. 30-year mortgage rates have jumped above 5% for the first time since last spring, in a rapid rise that could present a challenge to the still-troubled housing market. The average rate on 30-year fixed-rate mortgages climbed to 5.05% in the week ended Thursday, according to a widely watched survey by government-backed mortgage company Freddie Mac, up from 4.81% a week ago.
Bundesbank Head's Move Angers Merkel. Weber's Decision to Not Seek Top Post at ECB Undermines Chancellor's Effort to Win Back Germans' Confidence on Euro. German Chancellor Angela Merkel, angered over Axel Weber's surprise decision not to pursue the presidency of the European Central Bank, is expected to press the Bundesbank head to resign his office as soon as she can name a successor, people familiar with the matter said. The loss of Mr. Weber as Germany's candidate to succeed current ECB President Jean-Claude Trichet, who is due to retire in October, has undermined a key plank of Ms. Merkel's strategy to restore Germans' confidence in the euro.
The Time for Spending Cuts Is Now. The White House argues that 'draconian' cuts will derail the economy. In fact, cuts are necessary to preserve tax rates that are compatible with economic growth. Let's put this in perspective: With the Congressional Budget Office (CBO) now projecting a federal budget deficit this year of $1.5 trillion, Mr. Obama is on course to add as much debt in one term as all 43 previous presidents combined. Not surprisingly, the rating agency Standard & Poor's is warning of a Treasury downgrade. Yes, the president is calling for a freeze on nondefense discretionary spending (18% of the budget). But this would leave that spending more than 20% higher than already- elevated 2008 levels, where Republicans would like to return. The freeze also cements in place a huge expansion of government originally sold as a temporary, emergency response to the economic and financial crisis.
CNBC:
Ford(F) to Cut Debt by Another $3 Billion; Shares Rise. Ford will pay down another $3 billion in debt in the first quarter as it works toward regaining its investment grade rating in the final stage of its four-year turnaround.
News Corp.'s(NWS) Murdoch Makes Major Buy of NWS Shares. News Corp. (NWS, NWSA) Chief Executive Rupert Murdoch acquired nearly $20.2 million worth of nonvoting stock in his media empire, according to a filing with the Securities and Exchange Commission, marking his largest acquisition of company stock in years. A spokeswoman for the company, which owns this newswire and The Wall Street Journal, said the acquisition is "a sign of his belief in the future of the company." Murdoch purchased about 1.2 million Class A shares this week at an average price of $16.81 apiece.
Content Management Firm Moves Into Smart-Phone Market. One of those companies, Open Text (OTEX), has increased quarterly earnings at least 18% over the past five quarters as more clients adopt its enterprise content management (ECM) software. Its gear is used to manage everything from e-mails and documents to videos and marketing materials.
CNN Money:
IMF Calls for Dollar Alternative. The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency.
California Spent $90 Million a Day on Unemployment Benefits. California's Employment Development Department spent $22.9 billion on unemployment benefits in 2010, a record amount, the EDD said Thursday. The benefits, paid to 1.7 million Californians, average out to about $90 million each business day. "The numbers are staggering and the need undeniable," said Pam Harris, chief deputy director of the EDD. The state paid out $20.2 billion in unemployment benefits in 2009. That topped the previous record of $8 billion that the state paid out in 2008. Some of the increase can be attributed to the federal unemployment benefit extensions passed by Congress in 2008 and 2009.
Micron(MU) to Reveal Tech It Says Increases Chip Speed 20-Fold. Micron Technology tomorrow is set to disclose a hybrid memory technology that it claims will boost performance 20-fold over the memory chips used in PCs today. Micron, the largest manufacturer of memory chips in the U.S., says the "Hybrid Memory Cube" can tap into the full performance potential of DRAM--or dynamic random access memory--resolving a longstanding problem referred to as the "memory wall."
Rasmussen Reports:
43% Say Government Policy Mistakes Created Great Depression of 1930s, 26% Disagree. Economists still argue about what caused the Great Depression of the 1930s and what got the nation out of it. But 43% of Likely U.S. Voters think government policy mistakes converted a normal recession into an unprecedented Depression. A new Rasmussen Reports national telephone survey shows that just 26% disagree.
USA Today:
Investors Push Money Back into Mutual Funds. In the past four weeks, individual investors who buy stocks through mutual funds have invested nearly $12 billion in domestic stock funds, Investment Company Institute data show. In contrast, investors have yanked $22.5 billion out of bond funds — which had been viewed as a haven — in the past 12 weeks. This is a sign of what could be a major shift in investor behavior, says Jack Ablin of Harris Private Bank. "It's the beginning of a trend."
Reuters:
Qualcomm(QCOM) Unveils New Chip Aimed at Tablets.Qualcomm Inc said on Thursday that its newest dual-core processor was designed to compete in the red-hot tablet market against Texas Instruments(TXN) and smaller rival Nvidia(NVDA), which has dominated design wins in early 2011. Qualcomm's APQ8060 dual-core Snapdragon processor is being used in Hewlett-Packard Co's "TouchPad", which was unveiled on Wednesday. Steve Mollenkopf, Qualcomm's Group president, said in an interview on Thursday that companies had agreed to use its processors in more 20 tablets.
Chipotle(CMG), Panera(PNRA) Lead US Restaurant Results. Chipotle Mexican Grill Inc (CMG.N) and Panera Bread Co (PNRA.O) reported quarterly results that outshone their peers as many restaurants continue to struggle during a slow U.S. economic recovery. Both are relatively new chains that are rapidly adding more restaurants. They have found a following among diners who are willing to pay a bit more for quick meals made with upscale ingredients like naturally raised meats and artisan cheese. Chipotle and Panera have chalked up 12-month gains of about 160 percent and 40 percent, respectively, on industry-leading sales trends, and investors have wondered how long their outperformance would last. Chipotle, which features organic and natural ingredients, on Thursday said fourth-quarter sales at established restaurants jumped 12.6 percent, an acceleration from the 11.4 percent climb in the prior quarter. The Denver-based burrito chain also reported quarterly profit that topped Wall Street's view and repeated its forecast of a low-single-digit percentage gain in 2011 same-store sales. Shares in the company -- now facing a widening federal crackdown on its undocumented work force -- rose 8.6 percent to $278.80 in extended trading. Panera, which serves lavish sandwiches, salads and pastries, said same-store sales at company-owned bakery-cafes rose 5.2 percent in the fourth quarter. The company on Thursday reported fourth-quarter profit above analysts' average view, boosted its full-year earnings forecast and called for 2011 same-store sales growth of 4 to 6 percent. Panera's shares jumped 10.5 percent in extended trading.
The number of Chinese cities imposing limits on home purchases may double to 72. Home prices may begin falling month on month some time this year, citing Yang Hongxu, a researcher at E-House China R&D Institute.
China Daily:
Economic growth in China's Zhejiang must slow in the next five years as the province has "many problems" in its development, citing Governor Lu Zushan. The province's problems include "long-standing structural" issues that are largely due to "over-dependence" on low-end industries and low-cost labor, citing Lu. Zhejiang province's focus should shift to ensuring the "quality and sustainability" of its economy, Lu said.
Evening Recommendations SunTrust Robinson:
Rated (LSTR) Buy, target $53.
Rated (AAWW) Buy, target $75.
Night Trading
Asian equity indices are -1.50% to unch. on average.
Asia Ex-Japan Investment Grade CDS Index 109.0 +2.0 basis points.
Asia Pacific Sovereign CDS Index 121.75 +4.75 basis points.
The Trade Deficit for December is estimated to widen to -$40.5B versus -$38.3B in November.
9:55 am EST
Preliminary Univ. of Mich. Consumer Confidence for February is estimated to rise to 75.0 versus a reading of 74.2 in January.
Upcoming Splits
(HRL) 2-for-1
(BLL) 2-for-1
Other Potential Market Movers
The (URI) investor day, (MU) analyst conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial 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.
Higher: On gains in my Medical, Biotech 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 bullish as the S&P 500 trades about even, despite Mideast unrest, rising long-term rates, emerging markets inflation fears, tech sector earnings disappointments and rising eurozone debt angst. On the positive side, Road & Rail, Education, Wireless, Disk Drive, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than 1.0%. "Growth" stocks are outperforming "value" shares. The Transports found support at the 50-day moving average and are surging convincingly higher today. The Egypt sovereign cds is falling -4.88% to 337.62 bps. Oil is falling -.16%, Lumber is rising +.62% and Copper is gaining +.43%. The Citi US Economic Surprise Index is rising another +4.72% to +66.60, which is the highest level since Sept. 1, 2009. Networking stocks are surging despite (CSCO)/(AKAM) weakness, which is also a big positive. On the negative side, Homebuilding, Internet, Hospital and Gold shares are under pressure, falling more than 1.0%.The Hungary sovereign cds is up +2.37% to 291.33 bps, the Emerging Markets CDS Index is rising +2.19% to 217.48 bps and the Euro Financial Sector CDS Index is rising +3.92% to 133.17 bps. Moreover, the Saudi sovereign cds is rising +16.01% to 125.0 bps. Emerging market equity indices continue to exhibit very poor technical action. The major US averages continue to display exceptional resilience as the bears were unable to gain meaningful traction with potential negative catalysts, once again. Even when market leader (AAPL) was plunging temporarily on an old report and a "sloppy seller", the major averages held firm. 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.
