Today's Headlines

Bloomberg:

• Import Prices in U.S. Rose 1.5% in January, Led by Fuels, Food. The cost of goods imported into the U.S. rose more than forecast in January, boosted by higher prices for commodities such as fuels and food. The 1.5 percent increase in the import-price index followed a revised 1.2 percent gain in December, Labor Department figures showed today in Washington. Economists projected a 0.8 percent increase for January, according to the median estimate in a Bloomberg News survey. Excluding food and fuel, import prices climbed 0.6 percent. A weaker dollar along with rising demand from emerging markets such as Brazil and China have pushed up prices of oil, food and building materials. From a year earlier, import prices increased 5.3 percent in January, compared with a 5.1 percent gain in December. Import prices were forecast to rise 4.4 percent in January from a year earlier, according to the survey median. The cost of imported petroleum rose 3.4 percent in January from the prior month and gained 18.5 percent over the past four months. Prices of imported food increased rose 2.6 percent last month, and were up 14.8 percent from a year earlier. Since reaching a one-year high on June 7, the dollar has fallen about 8.1 percent against a trade-weighted basket of major currencies, making imported goods more expensive.
  
• Food Prices Pushed 44 Million More Into Poverty, World Bank Says. Rising global food prices have pushed 44 million more people into “extreme” poverty in developing countries since June, the World Bank estimates. The Washington-based World Bank said its food-price index jumped 15 percent between October and January, led by wheat costs. “Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world,” World Bank President Robert Zoellick said today in an e-mailed statement. “The price hike is already pushing millions of people into poverty and putting stress on the most vulnerable, who spend more than half of their income on food.” Wheat and corn prices in Chicago have extended gains this year after jumping at least 47 percent in 2010. Surging food costs contributed to protests in Tunisia that ousted President Zine El Abidine Ben Ali last month and Egyptian president Hosni Mubarak.
• U.S. Economy: Retail Sales Climb Less Than Forecast. Sales at retailers rose less than forecast in January, showing it will be difficult for American consumers to sustain last quarter’s pickup in spending without bigger gains in employment. Purchases increased 0.3 percent, the smallest gain since a drop in June, according to Commerce Department figures today in Washington. Other reports showed manufacturing in the New York area accelerated and confidence among home builders stagnated. The sales data also indicated winter snowstorms may have played a role in the slowdown as Americans stayed away from restaurants and home-improvement stores.
• Option ARM Time Bomb Blows Early, Easing Damage to U.S. Housing. This was the year thousands of U.S. homeowners with option adjustable-rate mortgages were supposed to default as their payments spiked. Low interest rates and a surge of early delinquencies mean the numbers probably won’t be as bad as forecast, softening the blow to a housing market.
• Chart of the Day: Technology Boom is Backed by Profits This Time.
• Emerging-Market Stocks Fall on JPMorgan(JPM) Equity Forecast, Bahrain Protests. JPMorgan strategists led by Adrian Mowat in Hong Kong cut their year-end target for the MSCI index to 1,300 from 1,500 on expectations that accelerating inflation in developing nations will spur tighter monetary policy. “Developed markets are becoming more attractive on concern that rising inflation and interest rates could hurt growth in emerging nations,” said Jonathan Ravelas, strategist at Banco de Oro Unibank in Manila. “Portfolios are getting rebalanced in favor of developed markets.” The MSCI emerging-market index has dropped 4.1 percent this year as central banks in China, Brazil and India raised benchmark interest rates to curb inflation spurred by record food prices. The MSCI World index has gained 5 percent in 2011 as the U.S. Federal Reserve and European Central Bank keep borrowing costs at record lows.
• Portugal Raps Delays on EU Bailout Revamp, Spars With Germany. Portugal said delays in overhauling the European rescue fund for debt-hit states threaten a new bout of market turmoil, sparring with Germany and Austria over how to resolve the fiscal crisis. “The discussions are taking longer than desirable and delays and hesitations affect the euro zone and the stabilization on the euro,” Portuguese Finance Minister Fernando Teixeira dos Santos said at a meeting of European Union finance ministers in Brussels today. Criticism from Portugal, seeking to wrestle down Europe’s fifth-highest deficit without falling back on an aid package, met with a rebuff from Germany and Austria that highlighted the north-south split over reshaping the 17-nation economy. Bonds in Portugal and Greece slipped for a third day as Germany opposed a stepped-up rescue effort until European governments take fresh measures to bolster the region’s competitiveness.
• Google's(GOOG) YouTube Ad-Linked Video Views Climb to More Than 3 Billion a Week. YouTube is running advertisements on videos more than 3 billion times a week, a 50 percent increase from May, helping Google Inc. wring more revenue from its largest acquisition. Ad growth for the video-sharing website has also led to a surge in sales for makers of video clips for the site, said Shishir Mehrotra, director of product management at YouTube. The gain in ad-supported video views means that the company is making money on about one-fifth of its 14 billion weekly views, he said. “A lot of it is based on growing ad products as well as growing inventory,” Mehrotra said in an interview. “Our partners are starting to see real success on the platform, and so they’re starting to invest.” YouTube probably brought in about $710 million in revenue last year, up from $345 million in 2009, according to Sandeep Aggarwal, an analyst at Caris & Co. Mountain View, California- based Google doesn’t break out YouTube’s sales. Aggarwal also said YouTube likely reached profitability last year. YouTube first reached 3 billion ad-supported views weekly in October after hitting 2 billion in May 2010 and 1 billion in 2009, he said. Google, mostly due to YouTube, had more than 80 percent of the U.S. market for Internet-video views in December, making it the largest viewing site, according to ComScore Inc. No. 2 Yahoo! Inc. had 37 percent as many views as Google.
• Berkshire(BRK/A) Departs BofA(BAC) 'a Loser' on Stake After Three Years. Warren Buffett’s Berkshire Hathaway Inc. sold its stake in Bank of America Corp., ending an investment that spanned three and a half years in which the lender’s stock lost more than two-thirds of its value.
• Citigroup's(C) Pandit Says Emerging Markets at Risk of Overheating, Inflation. Citigroup Inc. Chief Executive Officer Vikram Pandit said emerging markets must prepare for possible inflation because they’re at “risk of overheating.” “Many of the emerging markets are operating at or near capacity and are therefore at risk of overheating,” Pandit said today in prepared remarks for an investor conference in New York hosted by the brokerage firm ISI Group Inc. They “must deal with the possible consequences of inflation.” Citigroup, the third-largest U.S. bank by assets, gets more than half its revenue from emerging markets, Pandit said.
• Republicans Grill Lew Over Budget as Battle Escalates. House Republican Budget Committee Chairman Paul Ryan told White House budget director Jacob Lew the president has “disappointed us all” with his $3.7 trillion budget request because the plan doesn’t go far enough on spending cuts. “Why did you duck?” Ryan said at a House Budget Committee hearing where Lew defended the proposal President Barack Obama unveiled yesterday. “You know the drivers of our debt are entitlement programs, and yet you do nothing to address that.”
• Apple(AAPL) Starts Subscription Payment Service in App Store. Apple Inc. started a subscription service for publishers of newspapers, magazines and other content applications, allowing them to sell multiple issues through a single purchase in the company’s online App Store. The subscriptions will be sold using the same App Store billing system that lets customers buy individual applications for the iPhone or iPad, the Cupertino, California-based company said today in a statement. Publishers who participate will have to offer their lowest subscription rates within Apple’s store. “All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app,” Apple Chief Executive Officer Steve Jobs said in the statement. Jobs remains involved with strategic decisions while on medical leave.

Wall Street Journal:

• Bahrain Opposition Bloc Defects as Protests Mount. A funeral for a man killed during demonstrations swelled into a massive protest Tuesday, drawing in thousands for a second day of clashes that ended with another death and the defection of the country's main opposition bloc from parliament. The clashes in Bahrain represent a significant escalation of the Arab unrest that has fanned out from Tunisia, culminating in the resignation of Egypt's Hosni Mubarak on Friday. Bahrain is the only Arab state so far in the oil-rich Persian Gulf beset by unrest amid protests across much of the rest of the Middle East.
• Iraq To Hold New Oil, Gas Exploration Bid Round In 4Q - Official.
• Deutsche Borse Sets Its Deal to Buy NYSE(NYX). NYSE Euronext and Deutsche Börse AG outlined plans for a combination that would create the world's largest exchange operator, but would face hurdles in winning support from regulators and lawmakers and overturning investor skepticism about forecast synergies. The companies aim to close a transaction by year-end that would see Deutsche Börse shareholders own 60% of the entity in an all-stock deal that offers NYSE Euronext shareholders a 10% premium to its share price before deal talks were announced.

CNBC.com:

• Hot Stocks: What Hedge Funds Bought in 4Q.

Business Insider:

• The 25 Best Companies To Work For In America.
• This Stunning Pie Chart Tells The Truth About Obama's Budget Cuts.
• Obama's Revenue Estimates Are Either Fantasy or Comedy. (graphs)
  

Zero Hedge:

• Per Declassified Testimony, Bernanke Blames Blogoshpere for Itemizing Disasterous Consequences of His Actions, Says Goldman(GS) is a Utility.
• China Sees January Car Sales Plunge 10.3%.
  

New York Post:

• O's Losing Ground Across Mideast. Despite the president saying that a nuclear Iran is "unacceptable," Iran may become a card-carrying member of the Mushroom Cloud Club this year; some experts believe it already has gathered enough uranium for at least a couple of A-bombs. Not to mention that its ever-expanding space-launch and satellite programs have put Tehran closer to developing an ICBM capable of reaching the US homeland -- all while our missile-defense programs lag behind the threat.

New York Times:

• SEC Questioned on Disclosure of Criminal Inquiries. It is no mystery that the Securities and Exchange Commission and the Justice Department work closely together in pursuing cases, often filing parallel criminal and civil cases on the same day. For lawyers involved in S.E.C. investigations, an important consideration is whether there is any criminal interest in the case — information that the agency has historically been loath to reveal.
• To Stand Out, Retailers Flock to Exclusive Lines. To find Miley Cyrus’s line of clothes, shoppers head to Wal-Mart. For Selena Gomez’s, they go to Kmart. Jennifer Lopez’s line is at Kohl’s, and Demi Lovato’s at Target. Rachel Bilson dinnerware can only be found at Macy’s, while for the Kardashian Kollection, fans must go to Sears.

Minyanville:

• Betting Against Submerging Markets.

ABC News:

• Oil Prices Fall on Economy, Supply Concerns. Oil prices fall from early highs as rising supplies and demand shift focus from Middle East. Benchmark West Texas Intermediate crude fell 66 cents to $84.15 a barrel in midday trading on the New York Mercantile Exchange after rising as high as $85.98 earlier in the session. In London, Brent crude fell 79 cents to $102.29 a barrel on the ICE Futures exchange.

MSNBC.com:

• John Edwards Investigation: Charges Near? Prosecutors say case against ex-candidate strong, but Justice Dept. has yet to OK charges.

Real Clear Politics:

• Bloomberg Predicts Health Care Law Will Be Defunded. In a video posted on an Orthodox Jewish online news publication on Monday, New York City Mayor Michael Bloomberg is seen discussing at length his critical views of the health care reform law, suggesting that it does not address the most pressing issues facing the health care system both nationwide and in the city he governs. In the video, Bloomberg is shown paying a visit to members of a mourning family who had recently lost their brother. After Bloomberg offers his condolences, one of the family members noted that his brother was in the emergency room for 73 hours before he died and said that overcrowding in emergency rooms in New York had become out of control. "It's going to get worse with the health care bill and with the government's cutbacks," Bloomberg said, predicting that hospitals would close due to a lack of funding. "All of these costs keep going up. Nobody wants to pay any more money, and at the rate we're going, health care is going to bankrupt us."

Politico:

• Liberals Launch Anti-Darrell Issa Crusade. Democrats are understandably obsessed with Darrell Issa — he’s built himself up as a one-man investigative machine aimed straight at the Obama presidency. But a handful of liberal political operatives in California — including a former Hillary Clinton hand — are taking their anti-Issa passion to a whole new level, launching a nonprofit group, a website and even paid media advertisements aimed at undermining and investigating the rabble-rousing chairman of the House Oversight and Government Reform Committee.

Reuters:

• Mobile Fair - ARM(ARMH) Sees Boost From High-End Smartphones.

USA Today:

• Builders Offer MGP-Like Home Efficiency Labels.

Financial Times:

• Rising Chinese Wages Pose Relocation Risk.

DigiTimes:

• Apple(AAPL) to Expand iPhone Screen Size to 4-Inches.

Xinhua:

• Inflationary pressure is likely to increase in China on rising food prices, citing a report by the APEC Business Advisory Council. The government may further cut lending quotas and increase interest rates and bank reserve requirements to rein in inflation, according to the report.
• Central China County Sees Surging Sales of "apartments up in the air" Despite Warning of Financial Risks. Despite the central government's efforts to control soaring housing prices and speculation, residents in a small county in central China's Henan Province are rushing to purchase, even if the apartments are still "up in the air". Realtors in Guangshan County in Xinyang City sell houses with just apartment layout plans. Some properties are even sold with old buildings on the foundations. A resident surnamed with Zhou, who paid 50 percent as a down payment last May for an apartment in the property project "Xianchengshuyuan", has not seen any construction signs on the lot. However, he is very optimistic about his potential apartment's value. "Although I haven't seen a brick, the price has almost doubled," he said.

Market News International:

• China may further tighten the money supply even after January inflation was below market expectations, citing two people close to the National Development and Reform Commission. The government is "facing growing inflation pressure in the coming months," one of the people said.

Netease.com:

• BYD Co.'s January vehicle sales fell 15% from a year ago to 52,0454 units, citing the company.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.73%)

Sector Underperformers:

• 1) Disk Drives -2.30% 2) Agriculture -1.74% 3) Education -1.59%

Stocks Falling on Unusual Volume:

• UCTT, STEC, CF, FOSL, CPLA, JDSU, AEIS, NDAQ, MRVL, OCLR, CGNX, GMCR, SGI, CBOE, CLI, NYX, NLY, MAS and FTI
  

Stocks With Unusual Put Option Activity:

• 1) DELL 2) WMB 3) MAS 4) XCO 5) MNTA
  

Stocks With Most Negative News Mentions:

• 1) NKTR 2) BIG 3) SSS 4) HUGH 5) EXR

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Value (-.04%)

Sector Outperformers:

• 1) Gold +1.29% 2) Steel +.54% 3) Banks +.20%

Stocks Rising on Unusual Volume:

• BCS, SLW, ALJ, CSIQ, CMC, SWC, PBR, DGIT, NVMI, NSIT, MERC, PERY, ECPG, AAWW, FWRD, JAZZ, GEOI, ARTC, NICE, CLDA, AKAM, RDWR, ABCO, ACIW, PAAS, IPXL, ZOLL, VCO, SF, DW, MMC and FDX
  

Stocks With Unusual Call Option Activity:

• 1) EQR 2) CHS 3) IPG 4) A 5) GPS
  

Stocks With Most Positive News Mentions:

• 1) SWK 2) DBD 3) LMT 4) A 5) OMX

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Tuesday Watch

Evening Headlines
Bloomberg:

• Tunisia Democracy Gridlock May Foreshadow Egypt Transition Woes. In what may be a lesson for Egypt, the ouster of Tunisian President Zine El Abidine Ben Ali one month ago has created conflict between politicians jostling to fill the political hole. The former ruling party says Islamic participation in a future government would hurt women’s rights and tourism, while the Islamists say their opponents should be permanently banned because they supported Ben Ali’s dictatorship.
• Bahrain Riot Police Use Tear Gas as Protesters Demand More Freedom, Jobs. Bahraini riot police were deployed to break up protests across the island nation as demonstrators, inspired by revolts in Egypt and Tunisia, demanded more political freedom and jobs. Police fired tear gas into crowds in the areas of Diraz and Bani Jamrah. Earlier, residents of the Shiite Muslim village of Nuweidrat said clashes broke out between activists and police after morning prayers. Police were present on the outskirts of Nuweidrat, where Shiite flags adorned buildings along alleyways. ”We were starting our peaceful protests when riot police attacked us with tear gas,” Nabeel Rajab, head of the Bahrain Center for Human Rights, said in an interview after the protest in Bani Jamrah was dispersed. “We will continue our protests until the government hears our demand.”
  
• EU to Double Rescue Fund in 2013, Takes No Fresh Portugal Steps. European governments agreed to double the lending capacity of the rescue fund for debt-laden countries in 2013, while seeing no need for immediate steps to shield Portugal from the fiscal crisis. Finance ministers decided that the future emergency aid mechanism will be able to lend 500 billion euros ($675 billion), twice the size of the fund set up in the wake of Greece’s near- default last year. “The situation on the sovereign-debt markets remains worrying,” Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing a meeting of European finance ministers in Brussels yesterday. “The Portuguese authorities did take effective actions. If this action would reveal itself as not having been sufficient, other measures will have to be taken, but I have no indications that this has to be done in the short term.”
• China's January Inflation Data Today Cuts Food Weighting, Newspaper Says. China’s January inflation data to be released today will reflect a reduced weighting for food in the consumer-price index, the China Securities Journal reported, citing an unidentified statistics bureau official. While China makes minor changes to CPI weightings each year, the latest moves are part of a more thorough adjustment every five years, the newspaper cited the official as saying. Food has accounted for about a third of the index and was the main driver of China’s inflation last year.
• China Inflation Less Than Estimated as Food Weighting Cut. Inflation exceeded the government’s 2011 target for a fourth straight month in China as prices excluding food rose the most in at least six years, escalating pressure on the central bank to keep raising interest rates. Consumer prices rose 4.9 percent last month from a year earlier, the statistics bureau said in a statement on its website today. That compared with a 4.6 percent gain in December and the median forecast of 5.4 percent in a Bloomberg News survey of 27 economists. Producer-price inflation accelerated to 6.6 percent from 5.9 percent in December. A drought in wheat-growing regions, rising global commodity prices and a 53 percent increase in money supply in two years are adding to price pressures.
• Corn Set for Record on Surging Demand, Agrocorp Says. Corn may surge to a record in the first half and be the best-performing agricultural commodity as increased government purchases help to “inflame” the market, according to Agrocorp International Pte.
• Appaloosa Buys Bank of America(BAC), Citigroup(C) Shares. Appaloosa Management LP, the hedge fund founded David Tepper, bought shares of Bank of America Corp.(BAC) and Micron Technology Inc.(MU) while more than doubling its position in Citigroup Inc.(C) during the fourth quarter. Appaloosa purchased 2.59 million shares of Bank of America in the period that ended Dec. 31, boosting its stake to 25.1 million, and opened a 17.8 million share stake in Micron, according to a filing today. Its ownership in Citigroup jumped to 117.5 million shares, an increase of 66.3 million. Tepper ran the top fund among hedge funds with assets over $1 billion in 2009 when he returned 132 percent to investors. The same fund earned 21 percent in 2010. He personally made between $2 billion and $3 billion in 2010, according to the Wall Street Journal.
• NFL Files Unfair-Labor Practice Charge Against Union. The National Football League filed an unfair-labor-practices complaint with the National Labor Relations board, saying its players’ union isn’t bargaining in good faith on a new contract.
• FedEx(FDX) Cuts Quarterly Profit Forecast on Winter Storms, Higher Fuel Prices. FedEx Corp. cut its profit forecast for the current quarter because of rising fuel costs and “severe” winter storms that reduced revenue and inflated expenses. Adjusted earnings will be 70 cents to 90 cents a share for the quarter ending Feb. 28, compared with an earlier projection of 95 cents to $1.15, the Memphis, Tennessee-based company said today in a statement. Analysts expected earnings of $1.02 a share, the average of 20 estimates compiled by Bloomberg. The reduction showed some of the economic fallout from the snow and ice that may make this winter the worst for flight cancellations since the government began tracking the data in 1987. FedEx, operator of the world’s largest cargo airline, said in December it was being “hammered” by storms. “This isn’t a read on the economy or volume,” said Art Hatfield, a Morgan Keegan & Co. analyst in Memphis who recommends buying the shares. “It’s a one-time weather thing, and the fuel costs they will recoup in time” with surcharges. The shares rose 7 cents to $94.06 at 5:23 p.m. after New York Stock Exchange composite trading.
• Goldman's(GS) Shumway Deal Shows Peril of Buying Hedge Fund Stakes. Goldman Sachs Group Inc. last year bought stakes in Shumway Capital Partners LLC and Level Global Investors LP, as a way for its clients to share in the fees of the two multibillion-dollar hedge funds. This month, both firms decided to kick out fee-paying investors, rendering the investments Goldman Sachs made through a private-equity fund potentially worthless.

Wall Street Journal:

• 'Brothers' in Egypt Present Two Faces. Moaz Abdel Karim, an affable 29-year-old who was among a handful of young activists who plotted the recent protests here, is the newest face of the Muslim Brotherhood. His political views on women's rights, religious freedom and political pluralism mesh with Western democratic values. He is focused on the fight for democracy and human rights in Egypt. A different face of the Brotherhood is that of Mohamed Badi, 66-year-old veterinarian from the Brotherhood's conservative wing who has been the group's Supreme Guide since last January. He recently pledged the Brotherhood would "continue to raise the banner of jihad" against the Jews, which he called the group's "first and foremost enemies." He has railed against American imperialism, and calls for the establishment of an Islamic state. After Egyptian President Hosni Mubarak stepped down on Friday amid the region's most dramatic grassroots uprising since the Iranian Revolution in 1979, the Brotherhood became poised to assume a growing role in the country's political life. The question for many is: Which Brotherhood?
• Tehran Beats Back New Protests. Iranian police used tear gas and electric prods to crack down on the country's biggest antigovernment protests in at least a year, as demonstrators buoyed by activism across the Middle East returned to the country's streets by the tens of thousands Monday. The day of planned antigovernment rallies began largely peacefully, according to witnesses, with protesters marching silently or sitting and chanting. But as demonstrators' ranks swelled, police and antiriot forces lined the streets, ordered shops to shut down and responded at times with force, according to witnesses and opposition websites, in a repeat of the official crackdown that helped snuff out months of spirited opposition rallies a year ago. By day's end, online videos showed garbage bins on fire, protesters throwing rocks at the police and crowds clashing with motorcycle-mounted members of the pro-regime Basij militia.
• Budget Battle Lines Drawn. President Barack Obama offered a 2012 budget Monday that would reduce the federal deficit over time but still leave spending at historically high levels because of mushrooming health and retirement programs. Under the proposal, spending as a percent of the U.S. gross domestic product would be 23.6% next year, down from 25.3% this year. Spending as a share of the economy would decline in later years, then rebound to the 23% level by 2020. That is because the budget doesn't address the unchecked growth of Medicare, Medicaid and Social Security.
• Huawei Set Back On Deal In U.S. A U.S. panel has decided Huawei Technologies Co. should divest itself of a small technology company the Chinese telecom-equipment maker bought in May. Huawei said Monday it was told by the Committee on Foreign Investment in the United States that it must divest the acquired company or the committee will make a recommendation to the U.S. president that the deal be unraveled. Huawei has decided to take its chances with the president, who doesn't have to act on the recommendation, said Bill Plummer, vice president for government affairs for Huawei USA.
• Chevron(CVX) Hit With Record Judgment. An Ecuadorian judge on Monday ordered Chevron Corp. to pay $8.6 billion to clean up oil pollution in the country's rain forest in what is believed to be the largest-ever judgment in an environmental case. And if the U.S. oil giant doesn't publicly apologize in the next 15 days, the judge ordered the company to pay twice that amount. The ruling brings to an end one chapter of a legal drama that has played out in courtrooms in Ecuador and the U.S. for nearly two decades. The case has been bitterly fought by both sides, with each accusing the other of improprieties. In recent months, Chevron uncovered a secret memo revealing the plaintiffs' strategy for enforcing any favorable Ecuadorian ruling around the world. That means that Chevron could be forced to defend itself in any of the dozens of countries where it does business. The oil company, which denies responsibility for the pollution, has no assets in Ecuador and has vowed to fight any efforts to seize its property overseas. Other multinational corporations are closely watching the case. The plaintiffs, residents of Ecuador's oil-rich Amazon rain forest, are seeking to hold Chevron accountable for environmental damage they say was caused by Texaco Inc., which operated in the country from 1965 to 1992. Chevron inherited the case when it acquired Texaco in 2001.
• The Cee Lo Green Budget. The cynical and unrealistic White House budget. This was supposed to be the moment we were all waiting for. After three years of historic deficits that have added almost $4.5 trillion to the national debt, President Obama was finally going to get serious about fiscal discipline. Instead, what landed on Congress's doorstep on Monday was a White House budget that increases deficits above the spending baseline for the next two years. Hosni Mubarak was more in touch with reality last Thursday night.
• ObamaCare and the Medicaid Mess. States need relief from the program's inflexible rules and escalating costs. Facing growing resistance to Medicaid costs, the Obama administration's Health and Human Services secretary, Kathleen Sebelius, sent a letter to states last week noting the "urgency of your State budget concerns" and suggesting some minor program changes to save money. They aren't enough.

CNBC:

• Goldman Sachs(GS) Cannot Stop Taking Over The Government.

MarketWatch:

• Heavy Metals Tainting China's Rice Bowls. As much as 10% of China’s rice may be tainted by poisonous cadmium, a heavy metal discharged in mine and industrial sewage that makes its way into rice paddies, according to agricultural researchers at a major university. Much of this poisoned rice is consumed by farm families or sold in areas of the nation’s food market beyond the reach of government safety regulators.

Business Insider:

• How The %&$! Do You Spend $3.7 Trillion? Here's a look at our break down of spending by department and some of their biggest projects. Read the full list of the $3.7 trillion President's budget here.
• Public Worker Unions Get Ready For A Showdown Over Wage, Pension Cuts.
  

Zero Hedge:

• Paulson Sells 10% Of BofA Stake, Increases Equity AUM From $23 to $30 Billion, Adds Numerous New Positions.
• Deutsche Bank Suspends New Issuance of Double Long Agricultural ETF (DAG).

IBD:

• EMC(EMC) Hopes To Lead The Journey To The Cloud.

New York Times:

• Companies Raise Prices as Commodity Costs Jump. A package of Oscar Mayer cold cuts. A pair of Nine West boots. A Whirlpool washing machine. By the fall, people will most likely be paying more for each of them, as rising prices hit most consumer goods, say retailers, food companies and manufacturers of consumer products. Cotton prices are near their highest level in more than a decade, after adjusting for inflation, and leather and polyester costs are jumping as well. Copper recently hit its highest level in about 40 years, and iron ore, used for steel, is fetching extremely high prices. Prices for corn, sugar, wheat, beef, pork and coffee are soaring. Labor overseas is becoming more expensive, meanwhile, and so are the utility bills to keep a factory running. “There are cost pressures from virtually everywhere,” said Wesley R. Card, the chief executive of the Jones Group(JNY), whose brands include Nine West and Anne Klein. After trying to keep retail prices flat or even lower during the recession, Jones says prices for its brands will climb 15 to 20 percent by autumn.

CNN Money:

• Budget Chiefs: Not Happy With Obama Plan. The top budget chiefs from both political parties criticized President Obama's 2012 budget Monday. Democrat Kent Conrad and Republican Paul Ryan, the budget chairmen in the Senate and House respectively, share one big beef: The Obama budget remains effectively silent on how to address the long-term drivers of debt -- Social Security, Medicare and Medicaid. By the end of the decade, those entitlement programs, together with interest owed on the country's debt, could command most of federal tax revenue coming in the door. Though ideologically different, Conrad and Ryan are both deficit hawks who sat on the president's bipartisan debt commission.

Washington Post:

• In His New Budget, Obama Kicks the Can One More Time. Our leaders are so good at kicking the can that it's almost uncanny.

Rasmussen Reports:

• 57% of Voters Favor Repeal of Health Care Law, 38% Opposed.
• 41% Favor High-Speed Rail Plan, 46% Oppose.
  

USA Today:

• GM(GM) to Dole Out $4,000 Bonus Checks - But Not to U.S. Taxpayers. Now that General Motors is finally making some money again, workers are going to get a nice one-time bonus: checks for $4,000. But should American taxpayers be repaid first? GM will pay more than $189 million in profit-sharing to 48,000 U.S. hourly workers and millions more in performance bonuses to salaried employees, according to company documents obtained by the Associated Press. GM will pay most hourly workers more than $4,000 each as compensation for its strong financial performance last year, said a person briefed on the bonuses. But not everyone is happy about it. The payments were condemned by a leading critic of the industry bailout in Congress. "Since the taxpayers helped these companies out of bankruptcy, the taxpayers should be repaid before bonuses go out," Sen. Charles Grassley, R-Iowa, said in a statement. "It sends a message that those in charge take shareholders, in this case the taxpayers, for a sucker."

Reuters:

• BOJ Tones Up Economic Optimism, Keeps Rates On Hold. The Bank of Japan raised its assessment of the economy on Tuesday to say it is gradually emerging from a slowdown, further signaling that no imminent monetary easing is on the horizon.
• Einhorn Takes Stakes in Sprint(S), BP(BP). Hedge fund manager David Einhorn's Greenlight Capital on Monday disclosed new stakes in half a dozen companies ranging from telephone company Sprint Nextel Corp (S.N) to energy company BP Plc (BP.L).
• U.S. to Stop Funding NATO Missile Defense Program. The United States on Monday said it would stop funding a multibillion-dollar U.S.-European missile defense program known as MEADS after fiscal year 2013, calling it unaffordable in the current budget climate. "Our partners may go forward with some MEADS, but it is not our plan to do so," the Pentagon's comptroller Robert Hale told a budget briefing. He was referring to Italy and Germany.
• Perry Ellis(PERY) Raises FY Outlook on Strong Demand. n">Apparel maker Perry Ellis International Inc raised its adjusted full-year earnings outlook and forecast a fourth-quarter profit largely above analysts' estimates, as its products continued to resonate well with customers. For full-year 2011, the company raised its adjusted full-year profit to $1.82-$1.85 per share from its prior forecast of $1.72-$1.80 a share. Shares of the Miami-based company, closed at $29.28 on Monday on Nasdaq. They were up 4 percent in extended trade.

Financial Times:

• Worries Surface Over Power of D Borse-NYSE Euronext(NYX) Link. Some of the world’s biggest banks are privately expressing concern over the market power of a proposed tie-up between Deutsche Börse and NYSE Euronext.

Evening Recommendations
Citigroup:

• Reiterated Buy on (GT), raised target to $19.

Night Trading

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 108.50 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 121.50 +.5 basis point.
  
• S&P 500 futures -.05%.
  
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GBE)/-.14
• (UTHR)/.63
• (OMC)/.81
• (FOSL)/1.35
• (CPLA)/1.10
• (MMC)/.39
• (ADI)/.65
• (DELL)/.37
• (MDRX)/.18
• (MCP)/-.10

Economic Releases
8:30 am EST

• Empire Manufacturing for February is estimated to rise to 15.0 versus a reading of 11.92 in January.
• The Import Price Index for January is estimated to rise +.8% versus a +1.1% gain in December.
• Advance Retail Sales for January are estimated to rise +.5% versus a +.6% gain in December.
• Retail Sales Less Autos for January are estimated to rise +.6% versus a +.5% gain in December.
• Retail Sales Ex Auto & Gas for January are estimated to rise +.4% versus a +.4% gain in December.

9:00 am EST

• Net Long-Term TIC Flows for December are estimated to fall to $40.0 Billion versus $85.1 Billion in November.

10:00 am EST

• Business Inventories for December are estimated to rise +.7% versus a +.2% gain in November.
• The NAHB Housing Market Index for February is estimated at 16.0 versus a reading of 16.0 in January.
  

Upcoming Splits

• (BLL) 2-for-1
  

Other Potential Market Movers

• The Fed's Pianalto speaking, weekly retail sales reports, weekly ABC consumer confidence reading, Goldman Sachs Tech/Internet Conference, Stifel Nicolaus Transports Conference, Deutsche Bank Small/Mid-Cap Conference, BofA Merrill Lynch Insurance Conference, (JNPR) analyst meeting, (AWK) investor conference, (GNW) investor day and the (JPM) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial 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.

Stocks Rising Slightly into Final Hour on Lower Energy Prices, Buyout Speculation, Fund Inflows, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 15.85 +1.02%
  
• ISE Sentiment Index 179.0 +16.23%
  
• Total Put/Call .88 +8.64%
  
• NYSE Arms .76 -29.78%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 80.66 -.64%
  
• European Financial Sector CDS Index 137.83 bps +5.60%
  
• Western Europe Sovereign Debt CDS Index 173.67 bps +.96%
  
• Emerging Market CDS Index 220.32 -.41%
  
• 2-Year Swap Spread 20.0 unch.
  
• TED Spread 20.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .11% unch.
  
• Yield Curve 277.0 -3 bps
  
• China Import Iron Ore Spot $189.50/Metric Tonne +.32%
  
• Citi US Economic Surprise Index +68.40 +1.3 points
  
• 10-Year TIPS Spread 2.31% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +40 open in Japan
• DAX Futures: Indicating +19 open in Germany

Portfolio:

• Higher: On gains in my Ag, Tech and Biotech 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 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, Coal, Oil Tanker, Oil Service, Steel and Construction shares are especially strong, rising more than 1.0%. Small-caps are outperforming. Oil is falling -.5% and continues to trade very poorly. Copper is rising +1.94% and continues to trade very well. Moreover, the UBS-Bloomberg Spot Ag Index is falling -.84%, which is also a positive. The 10-year yield is stable at 3.62%. The Citi US Economic Surprise Index remains at the highest level since Sept. 1, 2009. The Saudi sovereign cds is falling -5.34% to 118.32 bps and the Israeli sovereign cds is declining -2.23% to 144.85 bps. On the negative side, Retail, Wireless, Utility, Insurance, Telecom and Defense shares are under mild pressure, falling more than .5%. The Greece sovereign cds is up +5.29% to 909.65 bps, the Brazil sovereign cds is rising +3.35% to 124.0 bps and the Spain sovereign cds is rising +4.80% to 253.25 bps. The Western Europe Sovereign CDS Index has been trending higher over the past week, which is a big negative. Heavily-shorted (GMCR) is exploding higher on volume. While I am not currently long this stock, it is another situation that should give the bears pause. The major US averages are continuing their slow grind higher, despite potential headwinds, which is a big positive. The import price index, released tomorrow, will likely exceed estimates. I will monitor the 10-year yield's reaction to this data closely. I expect US stocks to trade mixed-to-higher into the close from current levels on earnings optimism, short-covering, technical buying, US fund inflows, buyout speculation and falling energy prices.

Today's Headlines

Bloomberg:

• Geithner Quietly Tells Obama Debt-to-GDP Cost Poised to Increase to Record. Barack Obama may lose the advantage of low borrowing costs as the U.S. Treasury Department says what it pays to service the national debt is poised to triple amid record budget deficits. Interest expense will rise to 3.1 percent of gross domestic product by 2016, from 1.3 percent in 2010 with the government forecast to run cumulative deficits of more than $4 trillion through the end of 2015, according to page 23 of a 24-page presentation made to a 13-member committee of bond dealers and investors that meet quarterly with Treasury officials. Net interest expense will triple to an all-time high of $554 billion in 2015 from $185 billion in 2010, according to the Obama administration’s adjusted 2011 budget. “It’s a slow train wreck coming and we all know it’s going to happen,” said Bret Barker, an interest-rate analyst at Los Angeles-based TCW Group Inc., which manages about $115 billion in assets. “It’s just a question of whether we want to deal with it. There are huge structural changes that have to go on with this economy.” The amount of marketable U.S. government debt outstanding has risen to $8.96 trillion from $5.8 trillion at the end of 2008, according to the Treasury Department. Debt-service costs will climb to 82 percent of the $757 billion shortfall projected for 2016 from about 12 percent in last year’s deficit, according to the budget projections. “If government debt and deficits were actually to grow at the pace envisioned, the economic and financial effects would be severe,” Federal Reserve Chairman Ben S. Bernanke told the House Budget Committee Feb. 9. “Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living.”
• Republicans Dismiss Obama Budget as 'Path to Bankruptcy'. President Barack Obama’s $3.7 trillion budget sets off a clash with congressional Republicans who seek deeper spending cuts. Obama’s first budget request since Republicans took House control was met immediately today with demands for a far bolder reshaping of government. House Speaker John Boehner, an Ohio Republican, said the president’s plan “will destroy jobs by spending too much, taxing too much and borrowing too much.” He promised a rival plan for 2012 within weeks. Republicans said the president ignored the need to address the growth of entitlement programs, such as Social Security and Medicare, that make up most government spending. “The president’s budget accelerates our country down the path to bankruptcy,” House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, said in a statement. He said the plan “puts the government on track to nearly double in size since the day he took office -- a direct result of his party’s reckless spending spree.” The current fiscal year’s deficit is forecast to reach a record $1.6 trillion -- 10.9 percent of gross domestic product. “I still don’t see a sense of urgency from the president about the massive federal debt,” Senator Lamar Alexander of Tennessee, the third-ranking Republican, said in a statement. He said Obama’s blueprint calls for too much government borrowing. Republican Senator John Cornyn of Texas called the budget proposal “timid.”
  
• Gross Cuts Government Holdings to Lowest Since 2009. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., reduced its holdings of government related debt to the lowest level since January 2009 while saying low yields cheat investors. Gross cut the proportion of U.S. government and related securities in Pimco’s $239 billion Total Return Fund to 12 percent of assets in January from 22 percent in December, according to the Newport Beach, California-based company’s website. He increased the percentage of cash equivalent holdings to 5 percent, the highest since April. Policy makers are robbing savers by driving down real interest rates as they keep borrowing costs at record lows in a “devil’s bargain,” Gross said in his monthly investment commentary on Feb. 2. Because of so-called easy monetary policies in developed countries, combined with larger debt loads and increasing inflation expectations, investors in developed market sovereign debt are taking a “haircut,” he said.
• IRS Would Add 5,000 Employees Under Obama's Budget Proposal.
  
• 'Swipe' Fee Cap May Force Fees, Job Cuts, Bankers Say. U.S. community banks may eliminate free products, fire workers and shelve expansion plans if the Federal Reserve imposes proposed debit-card “swipe” fee caps, according to a survey conducted by a trade group. The caps, required by the Dodd-Frank Act, are “deeply flawed,” and an exemption for firms with less than $10 billion in assets won’t shield smaller banks from its negative effects, Independent Community Bankers of America President Camden Fine said in a statement. To back up its case, the group plans to release results of a survey today highlighting steps it says bankers would have to take in response to the new rule. Of the bankers surveyed, 93 percent said they would be required to charge customers for services that are currently free. Another 50 percent said they would charge customers a fee each time they use a debit card.
• Copper Rises to Record in London After China's Imports Increase. Copper rose to a record in London after imports increased in China, the world’s largest metal consumer. On the Comex in New York, copper futures for March delivery rose 8.95 cents, or 2 percent, to $4.6255 a pound.

Wall Street Journal:

• Consumer and Business Spending to Spur Expanding U.S. Economy. A newly resilient economy is poised to expand this year at its fastest pace since 2003, thanks in part to brisk spending by consumers and businesses. In a new Wall Street Journal survey, many economists ratcheted up their growth forecasts because of recent reports suggesting a greater willingness to spend. "We're in a lot different place from last year," said Goldman Sachs's Jan Hatzius, who last year was one of the most bearish economists on Wall Street, but now is among the most optimistic on growth. The 51 economists polled—not all of whom answer every question in the survey—expect gross domestic product will be 3.5% higher in the fourth quarter of 2011 than a year earlier, up from the 3.3% increase they projected in last month's survey. That would be the largest increase since 2003. They look for GDP to expand at a 3.6% annual rate in the current quarter, accelerating from the 3.2% rate recorded in the final months of 2010.
• Bahraini Police Break Up Protests. Bahraini riot police fired tear gas and rubber bullets to disperse protesters Monday, according to eyewitnesses, while thousands of Yemenis returned to the streets for a third day of demonstrations, with regime supporters and protesters facing off violently with each other in the capital, San'a.
• Interview: Nowotny Says ECB "Vehemently Not" Turning Soft On Inflation.
• Obama Budget Includes Derivatives Fees for CFTC. The Obama administration's fiscal-2012 budget proposes new derivatives fees for entities regulated by the Commodity Futures Trading Commission, a way to boost the regulator's funding as it gears up to police the $583 trillion over-the-counter derivatives market. The Obama budget includes about $117 million in proposed CFTC fees. The agency would see its funding jump to $308 million in fiscal year 2012, up from roughly $168 million in 2010.
• European, North African Debt Markets Pressured by Higher Risk. The cost of insuring debt rose for European and Middle Eastern countries Monday as sovereign default worries in Greece and Ireland coincided with spreading political unrest in North Africa and the Persian Gulf.

MarketWatch:

• Mobile World Congress 2011.

CNBC.com:

• Hedge Funds Are Buying More Muni Bonds.
• Under Armour(UA) Wins The Cam Newton Marketing Race.
  

Business Insider:

• 15 Tax Hikes Hidden in Obama's New Budget.
• Netflix(NFLX) Explodes Higher After Announcement That Includes The Words "Android" and "Qualcomm" and "Tablet".
• China Has Started Fining Companies That Dare to Hike Food Prices.
• Mexico Drug War Carnage: Nearly 40 Killed Over the Weekend.
  

Zero Hedge:

• Iran Police Disperse Tens of Thousands of Tehran Protesters With Teargas as Rioting Spreads: Follow Events in Real-Time.
• China Investment Corp Hikes Stake in Morgan Stanley(MS) to Just Under 10%, Becomes Second Largest Holder.
• According to Its National Bureau of Statistics, Chinese Food Prices Have Increased by 4.6% in 10 Days!
• A 50% Pick Up In Revenue in 2 Years: A Cheat Sheet for Obama's Wacky and Wonderful Budget.
  

Detroit Free Press:

• Obama's Approval Rating Slips Further in Michigan, Survey Says. Michiganders are optimistic about the next year financially, despite 43% who say their personal finances are worse than a year ago, according to a survey last fall released today by Michigan State University. And Michigan’s opinion of President Barack Obama continues to plummet; only 33% rate his job performance fair or excellent, his lowest level yet in the state.

Benzinga:

• Charlie Gasparino: CME(CME) Could Go Hostile for NYSE Euronext(NYX). Charlie Gasparino is reporting that a potential love triangle could be happening between the CME Group (NASDAQ: CME), NYSE Euronext (NYSE: NYX) and Deutsche Borse could be happening. The CME could pursue a hostile bid for the NYSE, and the company refuses to deny the speculation. Gasparino is reporting that the CME has the money to bid for NYSE Euronext, and there are a bevy of other options that the CME has for the plans of the NYSE.

Reuters:

• China Gets First Official Hedge Fund. China's hedge fund industry took a small but significant step on Monday as Guotai Junan Securities Co readies a $45 million (28 million pound) hedge fund, the first such product approved by securities regulators. The move, if successful, could spur other brokerages, fund managers and even trust firms to follow suit, sowing the seeds for China's own George Soros or James Simons.
• EchoStar(SATS) to Buy Hughes Communications(HUGH) for $1.33 Billion. EchoStar Corp agreed to buy Hughes Communications Inc for about $1.33 billion as the digital set-top box maker looks to beef up its satellite television and broadband services. Hughes is one of the world's largest providers of broadband satellite services and the deal could give EchoStar the width to expand its customer base and its array of services, including mobile television and Internet Protocol TV.
• BofA Merrill Lynch Raises S&P 500 EPS Outlook. Bofa Merrill Lynch Global Research has raised 2011 and 2012 S&P 500 .SPX earnings-per-share (EPS) estimates, citing a pickup in growth and strong fourth-quarter reporting. The estimates on the S&P 500 for 2011 was raised to $95 from $93 and to $102 from $99 for 2012. The new 2011 target is a 12 percent EPS growth from 2010, BofA said in a research note. "We expect sales growth of 7.5 percent and 7 percent for 2011 and 2012 driven by strong business capex, exports and foreign sales on healthy global GDP growth and acquisition." But BofA retained its target on the S&P 500 at 1,400 for 2011.
• Fannie, Freddie to Need Almost $90 Billion More - White House. The White House expects to shovel close to $90 billion to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) over the next few years.
• US Hedge Fund Managers' Top Picks, Pans.
• Drugmakers Could Take Hit Under Obama Budget. Big pharmaceutical companies could face increased competition from generic drugmakers under two proposals put forth by the Obama administration on Monday. President Barack Obama, as part of his 2012 budget proposal, called for cutting the number of years drugmakers could exclusively market brandname biologic drugs to 7 years from 12.
• Fairholme Leaders Resign from St. Joe(JOE) Board.
  

Sueddeutsche Zeitung:

• Greece will probably have to restructure its debt as interest payments rise, Lars Feld, who is joining Germany's council of economic advisers, was quoted as saying.

Caijing:

• Beijing vehicle sales may fall by 60 billion yuan this year after the city issued measures to limit the number of automobiles, citing local government estimates.