Friday Watch

Evening Headlines
Bloomberg:

• G-20 Stung by Faster Inflation as Dispute Rages on Imbalances. Group of 20 policy makers, at odds over smoothing over global economic imbalances, confront a new threat as higher inflation ripples from emerging markets to advanced economies. A report of greater-than-expected U.S. inflation yesterday followed a jump in the European cost-of-living index to a two- year high and a pickup in Chinese prices, further fraying a tentative global consensus over how to sustain the recovery. “We clearly need to keep inflation at bay,” French Finance Minister Christine Lagarde, host of today’s G-20 meeting in Paris, told Bloomberg Television’s Francine Lacqua. “Too much inflation is not going to be conducive to growth."
• Libya's 'Day of Anger' Protest Reported to Leave at Least 19 People Dead. Libya’s “Day of Anger” protests against Muammar Qaddafi, in power for 41 years, led to clashes with pro-government forces in which at least 19 people were reported killed. An opposition website and an anti-Qaddafi activist said violence broke out during marches yesterday in five Libyan cities, according to the Associated Press. The 19 deaths were in the second- and third-largest cities, Benghazi and Beyida, according to Al Arabiya television. An opposition website said some demonstrators were killed by snipers from the internal security forces, according to AP. There is an absence of independent reporting due to Libya’s tight press restrictions.
• U.S. Credit-Default Swaps Approach Year Low on Economic Data. The cost of protecting U.S. investment-grade corporate bonds from default approached a one- year low as an index of U.S. leading indicators rose in January and manufacturing in the Philadelphia region accelerated. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 1.2 basis points to a mid- price of 79.3 basis points as of 5:02 p.m. in New York, according to index administrator Markit Group Ltd.
• Fed's Hoenig Says Farmland Boom May Be 'Unsustainable Bubble'. Federal Reserve Bank of Kansas City President Thomas Hoenig said soaring farmland prices may be the result of an unsustainable bubble that could damage the U.S. economy when it bursts. “My nagging concern remains that current distortions in financial markets are increasing the risk that imbalances in asset markets will catch agriculture -- and the U.S. economy more generally -- by surprise once again,” Hoenig told the Senate Agriculture Committee today, according to his prepared testimony. Hoenig spoke after a report today from the Chicago Federal Reserve showed Midwest farmland values rising 12 percent in the fourth quarter from a year earlier. In Hoenig’s district, the Kansas City Fed has recorded cropland prices nearly 20 percent above year-earlier levels in Kansas and Nebraska, Hoenig said. “This run-up in farmland values has occurred, however, amid financial markets characterized by high levels of liquidity and unusually low interest rates,” he said. “It is nearly impossible to determine how much of the farmland boom may be an unsustainable bubble driven by financial markets and how much results from fundamental changes in demand and supply conditions.” Hoenig said that an increase in borrowing costs could cause a drop in land prices. “Rising interest rates often coincide with falling farm revenues and higher capitalization rates, a depressing combination for farmland values,” he said. “Even if crop prices remain high but capitalization rates return to their historic average, farmland values could fall by as much as a third.”
• Debit-Card 'Swipe' Fee May Be Delayed as Lawmakers Assess Industry Impact. A proposed cap on debit-card ‘swipe’ fees scheduled to take effect in July may be delayed or revised amid questions about its impact raised by the financial industry, regulators and lawmakers. Federal Reserve Chairman Ben S. Bernanke, Fed Governor Sarah Bloom Raskin and Federal Deposit Insurance Corp. Chairman Sheila Bair, who testified at two congressional hearings today, aired concerns that could slow down the schedule for implementing the new rules.
• JPMorgan(JPM) Boosts Dimon's Stock Pay 22% to $17.4 Million. JPMorgan Chase & Co., the second- largest U.S. bank by assets, boosted Chief Executive Officer Jamie Dimon’s 2010 restricted stock payout by 22 percent to $17.4 million. The board awarded Dimon 251,415 restricted shares valued at about $12.1 million based on yesterday’s closing price, according to a filing today with the U.S. Securities and Exchange Commission. He also received 367,377 options valued at $5.3 million, based on Bloomberg calculations. That compares with 195,704 restricted shares valued at $7.95 million and 563,562 options valued at $6.24 million awarded last year for his work in 2009, according to disclosures by the New York-based company. Dimon, 54, may have also received a cash bonus for 2010 as well that hasn’t yet been disclosed. He took a salary of $1 million and gave up bonuses for 2008 after receiving $49.9 million in total compensation for 2007, which included cash and restricted stock bonuses of $14.5 million each. JPMorgan awarded Dimon’s top 15 executives more than $73 million in restricted shares, plus stock options, for their performance in 2010, according to Jan. 21 SEC filings. That compares with $64.2 million in stock granted to his top 16 executives a year ago, filings at the time show.
• North Korea May Attack Again in 'Months,' U.S. Says. North Korea may stage another attack “in months and not years,” said Navy Admiral Robert Willard, the top U.S. commander in the Pacific. North Korean leader Kim Jong Il appears to be training his son “on a compressed timeline” in “coercive measures” like the attacks last year that killed 46 sailors on the South Korean Cheonan warship and four people on the island of Yeonpyeong, Willard told a forum sponsored by the Asia Society in Washington today. “We may very well be facing the next provocation in months and not years,” Willard said in remarks that also touched on China and Southeast Asia.
• German Banks' Debt Downgraded By Moody's on Restructuring Act. German banks’ subordinated debt securities valued at 24 billion euros ($33 billion) were downgraded by Moody’s Investors Service on the prospect that new legislation will increase the risk of losses among debt holders. “The new regulatory tools allow authorities to impose losses on debt holders without necessarily placing the entire bank into liquidation,” the ratings firm said yesterday in a statement. “Moody’s considers subordinated debt to be most at risk under the new law.”
• China January Home Prices Defy Curbs, Rising in 68 or 70 Cities. rose from a year earlier in all but two of the 70 cities monitored by the government, defying property curbs to keep housing affordable. China’s January new home pricesNew home prices in the capital Beijing advanced 6.8 percent in January from last year, while Shanghai climbed 1.5 percent, the statistics bureau said on its website today, initiating a new method of calculating prices. Haikou had the biggest gain, surging 21.6 percent, and 10 cities had increases exceeding 10 percent. “The new data clearly shows home prices are still rising and the government curbs only suppressed transaction volumes,” said Jinny Yan, Shanghai-based economist at Standard Chartered Plc. “The ultimate problem is monetary policy -- the government should at least raise interest rates two more times this year because if the liquidity is not tightened, it would be impossible for home prices to fall.” China stopped releasing national average property prices and changed the methodology of the survey starting this year, the statistics bureau announced Feb. 16, to more accurately reflect price gains.

Wall Street Journal:

• Splits Emerge Among Egypt's Young Activists. Egypt's youth activists and opposition leaders are beginning to jockey for position, jousting over their revolutionary credentials and firing off accusations of going soft on the military, as the camaraderie that united them at the height of the uprising is replaced by rough-and-tumble politics.
• Spy Feud Hampers Antiterror Efforts. Ties between U.S. and Pakistani intelligence agencies have deteriorated sharply in recent months, compromising cooperation on a range of critical counter-terrorism efforts, including U.S. drone strikes targeting top militant leaders, current and former officials say. Some U.S. officials describe relations between the two spy agencies as the worst since the Sept. 11, 2001 attacks. One senior official said the tensions have cost the U.S. the chance to strike at some senior terrorists in the region. The state of relations, while never perfect, is now alarming counter-terrorism and military officials, who say close cooperation between the Central Intelligence Agency and Pakistan's Inter-Services Intelligence is essential to the campaign against al Qaeda and the war against the Taliban and its allies in Afghanistan.
• Wisconsin Union Fight Heats Up. Democratic lawmakers fled the state Thursday in an effort to torpedo a closely watched vote on what would be the nation's first major overhaul of union laws in years, as government workers flooded the statehouse for a third day seeking to block passage of the bill.
• Banks Find Loophole on Capital Rule. Some foreign banks are moving to restructure their U.S. operations to avoid one of the most-burdensome requirements of the new Dodd-Frank law. In November, Barclays PLC quietly changed the legal classification of the U.K. bank's main subsidiary in the U.S. so that the unit would no longer be subject to federal bank-capital requirements. Several other banks based outside the U.S. are considering similar moves, according to people familiar with the matter.
• Regulators Eye Apple(AAPL) Anew. U.S. antitrust enforcers have begun looking at the terms Apple Inc. set this week for media companies who want to sell their content on its popular iPad and other devices, according to people familiar with the matter.
• Banks To Be Among Winners Of OTC Derivatives Overhaul - Report. Banks will be among the biggest winners in the new regime global regulators are writing for the $583 trillion market for privately traded derivatives, while swaps users will see "very little change in overall economics," according to a report released Thursday from Morgan Stanley and consultancy Oliver Wyman. The assessment runs counter to earlier speculation that banks' revenues would suffer in the wake of the overhaul, with regulators trying to break the grip derivatives dealers have on the market and drive prices lower for the benefit of corporations hedging legitimate business risks. Dealers make $30 billion to $40 billion in revenue globally each year making markets in over-the-counter swaps, said Robert Urtheil, partner at Oliver Wyman in Frankfurt, compared with $3 billion to $4 billion each year on exchange-traded futures. While the overhaul may erode margins on OTC contracts by 5% to 10% annually--an estimate based on interviews and analysis of other markets that underwent similar changes--this will likely be offset by increasing volumes resulting from more efficient execution and new entrants, the report added. "The threat that was coming was huge, so we see [banks] as winners, preserving the market structure," said Urtheil. "The effect of regulation will probably not be as dramatic over time."
• Mutual Funds' Muni-Debt Prices Are Questioned. The Securities and Exchange Commission is investigating whether some mutual funds have overstated the value of risky municipal bonds that are thinly traded, according to people familiar with the matter. The SEC probe, which is part of the agency's broader effort to investigate possible abuses in the municipal-bond market, comes at a time of concern about financial stresses on municipal borrowers. The agency's concern is that investors in high-yield muni-bond mutual funds could be misled about the true value of their investment, according to people familiar with the matter.

Business Insider:

• Huge Money: Zynga To Raise $500 Million At $10 Billion Valuation. The money is from big investors T. Rowe Price, Fidelity and Morgan Stanley.
• 3 Big Bullish Signs Of Economic Growth. (graphs)
  

IBD:

• Adtran(ADTN) Sees Growth In The Smart-Phone Business.

New York Times:

• Illinois Pension Bonds to Test Investors' Faith. The first time Illinois tried to bail out its teetering pension fund by borrowing billions of dollars, it ended in disaster. Nevertheless, the state is trying again.

Forbes:

• Alaska Governor Refusing to Enact Health Care Law. Alaska Gov. Sean Parnell took a defiant stand against the federal health care overhaul passed by Congress last year, declaring Thursday that he will refuse to implement a law he views as blatantly unconstitutional. Parnell is the latest Republican governor to lash out against the law as the courts weigh the constitutionality of the overhaul. At least half of all states, including Alaska, have sued the government over the health care plan pushed by President Barack Obama.
• Believe It: Nanomesh Straw Turns Sewage Into Drinkable Water.
• The Looming Failure of Obamacare, Part 2: Incentives. Last week, I discussed information problems that were fundamental to third-party payer health care systems like Obamacare. By eliminating the prosaic act of shopping, the government has cut themselves off from critical information about the preferences and tradeoffs made by three hundred million Americans. As a result, any attempts to set pricing top-down are doomed to failure, as evidenced by the impossibility of implementing the “doc fix” to change Medicare reimbursement rates for doctors. But eliminating shopping, or the process of individuals making price-value-feature tradeoffs in purchasing medical care, has more downsides than just making pricing impossible. It also creates terrible incentives that have tended to push every single state health care system towards bankruptcy.

CNN Money:

• China is Richer, But Most Chinese Are Still Poor. (graphs)

Insider Monkey:

• Lee Ainslie and Maverick Capital's Extremely Bullish Stock Picks.

The Detroit News:

• While Obama is Spinning, Michigan's Snyder Leads. For those interested in comparing bold leadership to the wishy-washy variety, the release today of Gov. Rick Snyder's first budget is perfectly timed, coming as it does just four days after President Barack Obama gave the federal deficit disaster another big kick down the road. Obama's budget is a fraud. It continues manic deficit spending. The cuts it contains are mostly pretense, while the tax hikes are real and destructive. It avoids the two major threats to the nation's fiscal stability, Social Security and Medicare. And it leaves most of the tough decisions to Republican lawmakers, who will be demonized by the president and his political allies if they dare to make them. It's the work of a president who lacks the courage to lead. It also exposes the reality that Obama's objective is to increase the size and reach of the federal government, not shrink it, and nothing that happened in the November elections will move him off that mission.

Politico:

• House Votes to Overthrow 'Czars'. The House voted Thursday to dethrone nine White House “czars.” Republicans successfully added an amendment to the continuing resolution that would leave President Barack Obama’s senior advisers on policy issues including health care, energy and others out of a job. The vote was 249-179. Rep. Steve Scalise (R-La.) offered the amendment that blocks funding for various policy advisers to combat what he called “a very disturbing proliferation of czars” under Obama. “These unappointed, unaccountable people who are literally running a shadow government, heading up these little fiefdoms that nobody can really seem to identify where they are or what they’re doing,” Scalise said Thursday. “But we do know that they’re wielding vast amounts of power.”
  

Reuters:

• Convergys(CVG) May Spark Buyout Interest - Sources. As technology giants and private equity firms look for potential acquisition targets, customer relationship company Convergys Corp may spark renewed interest, several sources familiar with the situation said.
• U.S. House Votes to Overturn US FCC Internet Rules. The U.S. House of Representatives voted on Thursday to overturn proposed rules that bar Internet service providers from blocking legal content but give some discretion to ration access for bandwidth hogs. The vote -- which was spearheaded by Republican lawmakers determined to undo a range of Obama administration initiatives -- would block funds to implement rules proposed by the U.S. Federal Communications Commission in December.
• Intuit(INTU) Raises Earnings Forecast, Shares Rise. Intuit Inc, the maker of TurboTax and QuickBooks accounting software, reported a profit that beat Wall Street expectations and raised its quarterly earnings forecast, sending its shares up almost 3 percent.
• US Government Ordered to Act on Gulf Oil Drilling Permits.
• Weekly Equity Fund Inflows Up Nearly Four-Fold-Lipper.
• Brocade(BRCD) Beats Street, Shares Rise. Brocade Communications Systems Inc reported quarterly results and outlook that beat Wall Street expectations, sending its shares up 5 percent, despite worries it may experience the same problems afflicting bigger rival Cisco Systems In.
• Strong Fertilizer Demand Boosts CF's(CF) Q4 Profit. CF Industries Holdings Inc said quarterly profit spiked due to strong fall fertilizer application, a trend that executives said will continue in 2011.
• US Beefs Up Consumer Bureau With Wall Street Veterans. The U.S. Treasury said on Thursday that it hired former Wall Street veterans from Deutsche Bank(DB) and Morgan Stanley(MS) to help establish its new Consumer Financial Protection Bureau.
• US Fed Balance Sheet Grows to Record in Latest Week.
  

Financial Times:

• Private Recovery Can Create Growth Potion. Critics of the UK government calling for new growth strategies miss the point. Growth is not something concocted by the state, like a health potion at the chemist. Our job is important but modest: to create an environment for business to expand, invest and innovate; reviving what John Maynard Keynes called “animal spirits”. Some commentaries assume that achieving financial stability through fiscal discipline is a simple problem. It is not, but tackling it in an orderly way is far better than being dragged kicking and screaming by the bond markets, like some of our European neighbours.

Hindustan Times:

• US Announces $150 Million For Egypt to Help With Transition. US has announced $150 million in aid to Egypt in support of its transition process towards democracy following the ouster of President Hosni Mubarak. The Obama administration is also dispatching William Burns, the undersecretary of state for political affairs, and David Lipton, a senior White House adviser on international economics, to Egypt next week to talk with the interim military government on the issues related to transition. An announcement in this regard was made by Secretary of State Hillary Clinton after she briefed the US lawmakers in a classified setting on the current situation in Egypt after the fall of the Mubarak regime. "It's very clear that there is a great deal of work ahead to ensure an orderly democratic transition. It's also clear that Egypt will be grappling with immediate and long-term economic challenges," Clinton told reporters. The United States stands ready to provide assistance to Egypt to advance its efforts, she added. "I'm pleased to announce today we will be reprogramming $150 million for Egypt to put ourselves in a position to support the transition there and assist with their economic recovery. These funds will give us flexibility to respond to Egyptian needs moving forward," she said.

Nikkei:

• Japan will raise its assessment of the economy in a monthly report next week, noting improvement in exports and production.

Shanghai Daily:

• About 29% of Shanghai people say they received a pay increase in 2010, and 61% said they expect a raise this year, citing the Shanghai Statistics Bureau. Fewer than 10% of people were satisfied with their salaries, with 33% "not content" and 34.4% "very dissatisfied."
  

Evening Recommendations
Citigroup:

• Reiterated Buy on (H), raised estimates and boosted target to $59.
• Reiterated Buy on (TER), raised estimates, boosted target to $24.

Night Trading

• Asian equity indices are -.50% to +1.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 105.50 -1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 118.0 -3.0 basis point.
  
• S&P 500 futures +.08%.
  
• NASDAQ 100 futures +.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CRMT)/.59
• (AGP)/1.12
• (B)/.24
• (CPN)/.09
• (CPB)/.72
• (HMSY)/.42
• (PGN)/.44

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking and Treasury's Geithner speaking 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 into Final Hour on Fund Inflows, Lower Long-Term Rates, Technical Buying, Short-Covering

Broad Market Tone:

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

Equity Investor Angst:

• VIX 16.56 -.96%
  
• ISE Sentiment Index 116.0 -20.55%
  
• Total Put/Call .69 -24.18%
  
• NYSE Arms .74 -31.31%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 79.78 -.21%
  
• European Financial Sector CDS Index 127.50 bps -.26%
  
• Western Europe Sovereign Debt CDS Index 174.0 bps -.48%
  
• Emerging Market CDS Index 217.24 -1.52%
  
• 2-Year Swap Spread 20.0 unch.
  
• TED Spread 22.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .09% -2 bps
  
• Yield Curve 281.0 +3 bps
  
• China Import Iron Ore Spot $191.90/Metric Tonne unch.
  
• Citi US Economic Surprise Index +72.10 +8.2 points
  
• 10-Year TIPS Spread 2.29% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +39 open in Japan
• DAX Futures: Indicating +6 open in Germany

Portfolio:

• Higher: On gains in my Ag, Biotech, Medical, Retail and Tech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades at new multi-year highs, despite recent equity gains, global inflation concerns, rising Mideast unrest and mixed economic data. On the positive side, Education, Homebuilding, Construction, HMO, Hospital, Medical, Networking, Semi, Steel and Oil Service shares are especially strong, rising more than 1.0%. Small-Cap and cyclical stocks are outperforming. Tech shares are also outperforming again today, despite (AAPL) weakness. Copper is rising +.78%. The 10-year yield is falling -4 bps to 3.57% despite recent "hot" inflation readings, a very strong Philly Fed report and intensifying concerns over the US budget deficit. The US Muni CDS Index is dropping another -1.57% to 165.43 bps, which is also a large positive. The Citi US Economic Surprise Index is now at the highest level since Sept. 4th 2008. Singapore Electronics Exports grew +5.8% yoy in January versus a -1.1% yoy decline in Dec. On the negative side, Bank, Disk Drive, Computer and Airline shares are lower on the day. (XLF) has underperformed throughout the day. The UBS-Bloomberg Ag Spot Index is rising +1.68% and gold is rising .73%. The Saudi sovereign cds is jumping +4.08% to 126.24 bps and the Israeli sovereign cds is climbing +3.51% to 146.09 bps. Oil is beginning to gain a little upside traction, rising +1.48%. Further near-term gains are likely ahead of a three-day weekend with Mideast unrest spreading. The TED spread has broken out of its multi-month range and is now at the highest level since Aug. 11th, 2010. US equities remain extraordinarily resilient to any potential headwinds as they continue their slow grind higher. I expect US stocks to trade mixed-to-higher into the close from current levels on earnings optimism, US fund inflows, falling long-term rates, buyout speculation, technical buying and short-covering.

Today's Headlines

Bloomberg:

• Bahrain Army Moves to End Protests as Unrest Spreads. Bahrain’s army was deployed in the capital, Manama, after five people were killed in clashes between pro-democracy protesters and police as unrest spread across the Middle East. The military said it took control of large parts of the city and told people not to congregate in the main public areas. Police earlier used teargas shells and buckshot against mostly Shiite Muslim protesters who had gathered at the city’s Pearl Roundabout traffic junction to call for a constitutional monarchy and a change of government.
  
• Iran Says It's Sending Two Warships to Canal, TV Says. Iran is arranging with Egyptian officials to have two of its warships use the Suez Canal, Iranian state-run Press TV said. The Suez Canal Authority said after today’s report that no Iranian naval vessels had been granted permission to sail through the waterway.
• Factories in Philadelphia Area Expand at Faster Pace. Manufacturing in the Philadelphia region expanded in February at the fastest pace in seven years, underscoring factories’ contribution to the economic expansion. The Federal Reserve Bank of Philadelphia’s general economic index rose to 35.9, the highest level since January 2004 and exceeding the median forecast of 21 in a Bloomberg News survey of economists. The employment index in the Philadelphia Fed report climbed to 23.6, the highest level since April 1973, from a reading last month of 17.6. A measure of the average workweek rose to 12.8 in February from 10.6. The Philadelphia Fed’s new orders measure rose to 23.7, the highest level since Sept. 2004, from 23.6 in January. The shipments gauge jumped to 35.2 from 13.4 last month. The index of prices paid increased to 67.2 from 54.3 the prior month, while the measure of prices received advanced to 21 from 17.1.
  
• Consumer Prices, Jobless Claims Exceed Forecasts. The consumer-price index advanced 0.4 percent for a second month, led by the biggest increase in food costs in more than two years, according to figures today from the Labor Department in Washington. Americans are paying more for air travel and clothing as growing economies in Asia and Latin America boost demand for commodities like oil and cotton. Another report today showing more people than projected filed claims for jobless benefits last week indicates workers don’t have the power to seek bigger pay increases, evidence inflation is unlikely to flare. Over the past 12 months, costs climbed 1.6 percent. Energy costs increased 2.1 percent in January from a month earlier and rose 7.3 percent for the prior 12 months, today’s report showed. Food prices rose 0.5 percent last month, the biggest gain since September 2008, and were up 1.8 percent for the 12-month period. The so-called core rate, which excludes volatile food and fuel prices, rose 0.2 percent, the biggest gain since October 2009. These expenses increased 1 percent from January 2010, compared with a record-low 0.6 percent year-over-year gain as recently as October. Core inflation was boosted by a 1 percent increase in the cost of clothing, the most since February 2009, and a 2.2 percent rise in airline fares.
• U.S. Senate Democrats Told to Embrace Spending Cuts or Risk Voter Rebuff. Democratic senators gathered at a Virginia resort last week to plot political strategy got alarming news from a trusted pollster: Republicans are winning the debate over dealing with the budget deficit. The Democrats learned that while the public’s top concern is improving the economy, more voters view cutting spending rather than investing as the best way to do so. And right now, they trust Republicans more to do the trimming. These views were pronounced among independents, whose support Democrats will need in 2012 to hold the Senate, recapture the House and keep President Barack Obama in office. The data, presented to Democratic senators at their retreat by Geoff Garin, president of Peter D. Hart Research Associates, and obtained by Bloomberg News, highlight a dilemma for Obama and Democrats in the showdown with Republicans over federal spending. They must find a way to show the public they’re willing to cut, and they’re divided over how far to go.
• Bahrain Leads Surge in Mideast Debt Risk as Unrest Escalates. Bahrain led an increase in the cost of insuring Middle Eastern sovereign debt on concern escalating unrest will destabilize the Persian Gulf, where most of the region’s oil is produced. Credit-default swaps on Bahrain jumped for a fourth day, rising 18.5 basis points to 286, the highest since July 2009, according to CMA prices at 3 p.m. in London. Swaps on Egypt rose to the highest in more than a week as protests continued after last week’s resignation of President Hosni Mubarak. Pro-democracy protesters in Bahrain, home to the U.S. Navy’s Fifth Fleet, stepped up demands for the government to resign after a security crackdown left at least three people dead. Egypt’s banks and stock market remain shut with no official date to reopen. “Protests are becoming more geopolitical,” said Gabriel Sterne, an emerging-market economist at brokerage Exotix Ltd. in London. “The fact that it’s spread to wealthy countries makes it look like it’s more a cry for democracy rather than economic.” Egypt’s army urged people to return to daily life, saying protests are hurting the economy and threaten to weaken security. Finance Minister Samir Radwan said yesterday that more than two weeks of unrest cost the economy $310 million a day, as tourists shunned the country. “Up to now, investors have been rather patient and optimistic for the medium-term outlook for Egypt but the longer the disruption goes on, that patience wears thin,” Sterne said. “From an investor’s perspective, there’s been a disappointing follow up in Egypt with strikes continuing.” Swaps on Egypt rose 9.5 basis points to 350, the highest in more than a week, according to CMA. Contracts on Israel increased 2 basis points to 145, Lebanon rose 5 to 360, Dubai added 5.5 basis points to 423, Qatar was 3 higher at 102 and Saudi Arabia was up 3 at 125.
• Cotton Tops $2 for First Time in New York. Cotton topped $2 a pound in New York for the first time ever as accelerating global growth boosted demand for garments manufactured in China, the world’s biggest consumer and importer, amid shrinking global supplies. Cotton for May delivery rose by the exchange limit of 7 cents, or 3.6 percent, to a record $2.0193 a pound on ICE Futures at 10:35 a.m. in New York. Before today, prices were up 35 percent in 2011, the most of any of the 19 commodities in the Reuters/Jefferies CRB Index.
• Fed's Evans Says 'Disappointing' Recovery Warrants Current Stimulus Steps. Federal Reserve Bank of Chicago President Charles Evans said monetary stimulus is still needed to spur the “disappointing” pace of the economic recovery. “With unemployment too high and inflation too low -- and both forecasted to stay that way over the next two years -- we have missed on both of our policy objectives,” Evans said in the text of remarks prepared for delivery in Rockford, Illinois, today. “There is currently no policy conflict between improving the employment and inflation outcomes. This leads me to conclude that accommodative monetary policy continues to be beneficial for achieving each of these goals.” The central bank is also failing to meet its goal of price stability, which is “costly” as consumers took on debt with an inflation rate of about 2 percent in mind, Evans said. “Unexpectedly low” inflation also lowers revenue for businesses, increasing the real cost of labor and making companies less likely to hire, he said.
• Brent Crude Trades Near Two-Year High on Mideast Supply Concern. Oil traded near the highest in more than two years in London as civil unrest spread in the Middle East, renewing concern crude shipments will be disrupted. Brent futures were little changed after closing yesterday at the highest level since September 2008 as pro-democracy demonstrations stretched into a third day in Bahrain, while protesters clashed with police in Yemen and Libya, the eighth- biggest oil producer in the Organization of Petroleum Exporting Countries. Brent crude for April settlement was at $103.67 a barrel, down 11 cents, at 1:39 p.m. on the ICE Futures Europe exchange in London after advancing as much as 52 cents to $104.30 a barrel. The contract rose yesterday by $2.14 to $103.78, the highest close since Sept. 25, 2008.
• Gold Climbs for Fourth Day on Demand for Hedge Against Inflation. Gold advanced for a fourth day, touching a one-month high, as rising consumer prices boosted investor demand for an inflation hedge. The cost of living in the U.S. climbed in January for a seventh month, the government said today. Gold futures for April delivery climbed $7, or 0.5 percent, to $1,382.10 an ounce at 10:52 a.m. on the Comex in New York. Earlier, the price touched $1,833.80, the highest since Jan. 13. The metal reached a record $1,432.50 on Dec. 7.

Wall Street Journal:

• Loss of the Big Board to Germans Is a Crime, but Who's Guilty? The Big Board is an American institution, a symbol of our financial and corporate might. So who's responsible?
• Oil Industry Says Key Demand Met to Resume Deep-Water Drilling. An oil-industry consortium said Thursday that a response system that could quickly shut off a gushing well is ready, meeting a key demand from federal regulators before deep-water drilling can resume. But a new report from the president's oil-spill commission, also released Thursday, focuses on the need to prevent offshore oil spills in the first place, emphasizing that last summer's Deepwater Horizon spill was caused mainly by management failures and poor judgment, not a lack of hardware or technology.

CNBC.com:

• Mortgage Delinquencies 'Turn a Corner'. Fewer Americans are falling behind on their mortgage payments; in fact, the fewest in two years. Mortgages just one payment past due (30 days) fell to their lowest level since just before the recession began. Is it delays in paperwork from the so called "robo-signing" (faulty paperwork) foreclosure servicing scandal? No. It's actual fundamentals in the economy and the mortgage market.
• Is The Fed's Real Target 1,755 for the S&P?
• Goldman's(GS) Bungled Facebook Deal Irked Clients.
• Ratings Downgrades Loom for US States.
  

Business Insider:

• How Steve Cohen Crushed Whitney Tilson. Looks like Steve Cohen caused Whitney Tilson some pain on his Netflix(NFLX) and OpenTable(OPEN) shorts. In some circumstances, multi-billion hedge fund managers might squeeze a short just because they can, and Tilson's ~$200 million T2 Partners is relatively tiny. Cohen's SAC runs about $12 billion.
• What's Happening In The Real World? 20 Comments From 20 People Across North America.
• The Coolest and Wackiest Gadgets We Saw At The Mobile World Congress.
  
  The last five days at Mobile World Congress, we've spent SEVERAL hours walking the show floors, taking briefings, and watching keynotes, as companies showed off their newest and coolest mobile technology. Some of it is really cool!
• Democrats Flee Wisconsin to Avoid Vote on Union Bill. Wisconsin Democrats have "gone into hiding" to avoid a Senate vote on an emergency budget bill that would sharply curtail collective bargaining rights for public employees.
• Underemployment Just Hit The Highest Level In 10 Months. (graph)
  

New York Times:

• Google(GOOG) Search Results Get More Social. Google is taking its biggest step yet toward making search results more social. Though Google remains many people’s front door to the Web, people have increasingly been turning to social networking sites like Facebook and Twitter to search for shopping tips, what to read or travel information from people they know. Google said Thursday that its search results would now incorporate much more of that information.

Forbes:

• Steve Jobs Has Months To Live? American Cancer Society Cries Foul. The National Enquirer has reported that Steve Jobs has only six months to live based the paper’s analysis of photographs that purportedly show the Apple founder. Hogwash. Even if the photographs are real, the estimate of how much time Jobs has left, or any speculation about his condition, is baseless. You don’t have to take my word on that – you can listen to Otis Brawley, Chief Medical Officer of the American Cancer Society and a noted oncologist.

Politico:

• HUD to Rental Policy Groups: Sign Agreement, Stay Quiet. Obama administration officials told a group of housing proponents this month that they must sign a confidentiality agreement to continue participating in talks — a highly unusual request that has drawn criticism from a top Republican lawmaker who is investigating the matter. The agreement, obtained by POLITICO, bars participants from disclosing details discussed at meetings of a rental policy working group.

Reuters:

• Chinese Oil Majors on Foreign Tech Binge. Chinese oil majors are set to accelerate their overseas buying spree in unconventional oil and gas assets, with an eye on technology key to help shift China's reliance on coal to lower-carbon fuel over the next decade. Such technology will be critical for China to boost energy security and tap its own potentially vast unconventional gas resources -- part of the drive by the world's fastest-growing major economy to triple gas use -- as Chinese firms lack the expertise.
• Special Report: China Flexed Its Muscles Using U.S. Treasuries. Confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong lay bare China's growing influence as America's largest creditor. As the U.S. Federal Reserve grappled with the aftershocks of financial crisis, the Chinese, like many others, suffered huge losses from their investments in American financial firms -- from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck. The cables, obtained by WikiLeaks, show that escalating Chinese pressure prompted a procession of soothing visits from the U.S.Treasury Department. In one striking instance, a top Chinese money manager directly asked U.S. Treasury Secretary Timothy Geithner for a favor. In June, 2009, the head of China's powerful sovereign wealth fund met with Geithner and requested that he lean on regulators at the U.S. Federal Reserve to speed up the approval of its $1.2 billion investment in Morgan Stanley(MS), according to the cables, which were provided to Reuters by a third party. Although the cables do not mention if Geithner took any action, China's deal to buy Morgan Stanley shares was announced the very next day.
• Portugal Seen Taking Bailout by April - Eurozone Source. European Union member states are increasingly concerned about Portugal's ability to fund itself in financial markets and believe Lisbon will have to seek a bailout by April, a euro zone source said on Thursday. The EU has a rescue plan ready for Portugal, but it is dependent on Lisbon asking for the aid and making that request to both the EU and the International Monetary Fund. Portugal remains adamantly opposed to asking for assistance. "Portugal is drowning. It's not going to be able to hold on beyond the end of March," the euro zone source said. "That's already understood to be the case in financial markets, but now it's also understood among (EU) finance ministers."
• U.S. CEOs See Business Conditions Improving - Survey. Chief executives of major U.S. companies have a brightening view of business and economic conditions and look for the Federal Reserve to raise interest rates modestly this year, a survey by the Business Council found. A strong majority -- 70.4 percent -- of CEOs expect business conditions in their industry to improve over the next six months, the group said in a study conducted with The Conference Board and released on Thursday. That represents a marked change from the last edition of the survey, in October, when just 34.2 percent expected business conditions to improve. The improvement reflected a surge in confidence about the U.S. economy, and a brightening of CEOs' views of Europe, while their confidence in China deteriorated. Just under 46 percent expected Chinese business conditions to pick up over the next six months, compared with 49.3 percent who expected that in October.
• Canada's Harper Talks of "Horrendous" US Budget Deficit. In blunt comments on the U.S. economy, Canadian Prime Minister Stephen Harper said the United States faced "horrendous" budget challenges but should not look to Canadians to help overcome them.
• US Bank Regulators See Flaws in Debit Fee Crackdown. U.S. banking regulators acknowledged flaws in plans to cut debit card processing fees, adding to pressure on the Federal Reserve to modify how it implements part of the Dodd-Frank financial law. Sheila Bair, chairman of the Federal Deposit Insurance Corp, cited the likelihood that lower debit transaction fees would force smaller banks to make up for lost revenue with higher account fees for customers.

Globe and Mail:

• Cyber Attack Hits Ottawa; Probe Focuses On IP Addresses From China. A number of federal departments are struggling to deal with an outside cyber attack – including at the Department of Finance where officials are busy working on next month’s budget. According to senior federal officials, an attack that first became public at Treasury Board earlier this month also hit elsewhere in the federal public service, including Finance. An investigation into the attack is focused on Chinese IP addresses.

China Finance:

• Chinese banks are facing risks from loans to the property industry because of government tightening measures and housing market uncertainty, citing an interview with Xiang Junbo, chairman of Agricultural Bank of China Ltd. Loans to local-government financing vehicles also carry significant risks as some banks have inadequate internal controls while lending to these vehicles is large and "highly concentrated," Xiang said.

Bear Radar

Style Underperformer:

• Large-Cap Growth (+.12%)

Sector Underperformers:

• 1) Computer Hardware -1.34% 2) Banks -.52% 3) Airlines -.26%

Stocks Falling on Unusual Volume:

• NTAP, AEM, IT, TTEK, ITRI, DDIC, HOLI, ENOC, ORLY, ACOR, DWA, OMX, VCI and ECL
  

Stocks With Unusual Put Option Activity:

• 1) NTAP 2) YGE 3) AEM 4) LVLT 5) SPWRB
  

Stocks With Most Negative News Mentions:

• 1) ACC 2) NDN 3) PKG 4) PCG 5) RIG

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value (+1.0%)

Sector Outperformers:

• 1) Semis +1.07% 2) Education +.90% 3) Oil Service +.89%

Stocks Rising on Unusual Volume:

• WTW, WMB, NTRI, HPY, EP, SSYS, CAJ, IAG, NANO, CLF, NVDA, CVC, RBCN, TDSC, ARGN, SCHS, EHTH, AVEO, TYPE, CCME, GSM, PRAA, CATM, ENSG, SHPGY, DECK, CME, BSQR, CSTR, TBL, IO, CAB, FICO, ORB, JAH, MTZ, MED, SKX, GGC, FL, BAS, TRN, LZB, SJM and BGS
  

Stocks With Unusual Call Option Activity:

• 1) WTW 2) RBCN 3) HUM 4) WMB 5) CCI
  

Stocks With Most Positive News Mentions:

• 1) LEA 2) RBCN 3) DE 4) ODP 5) HOV

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Mideast Protests Spread to Libya Amid Bahrain Apologies, Clashes in Yemen. Pro-democracy demonstrations stretched into a third day in Bahrain, while police and anti- regime protesters clashed in Yemen and Libya, the latest country in the region hit by demands for change. Hundreds of Bahrainis gathered yesterday at the funeral of a demonstrator, who died in protests Feb. 15. They are demanding democracy and the ouster of Prime Minister Sheikh Khalifa bin Salman al-Khalifa, a member of the Sunni Muslim royal family who has held the post for four decades. The dissent in Bahrain, home to the U.S. Navy’s Fifth Fleet, follows the toppling of autocratic rulers by popular movements in Egypt and Tunisia and marks the spread of unrest into the Persian Gulf, where most of the Middle East’s oil is produced. Gulf states, including Saudi Arabia and the United Arab Emirates, are key U.S. allies, and Yemen is supported by the Obama administration in a campaign against al-Qaeda. “These movements are emboldening everybody who has grievances, whether they are a minority that wants to have equal rights or a majority that wants a functioning democracy,” Ebrahim Sharif, a Sunni who heads Bahrain’s National Democratic Action Society, said in an interview yesterday. “There is a feeling of people being empowered by these movements, that we are powerful. I think we are affecting even Iran.”
  
• Two Iranian Warships May Pass Through Suez Canal, Israel's Lieberman Says. Two Iranian warships in the Red Sea are preparing to transit Egypt’s Suez Canal en route to Syria, Israel’s foreign minister said, calling it another of Iran’s “provocations.” The Suez Canal Authority’s head of traffic, Ahmed El Manakhly, speaking by telephone, said yesterday that he hadn’t been informed of any Iranian warships planning to pass through the waterway. El Manakhly said military ships passing through the canal must first obtain permission from the Ministry of Defense and the Ministry of Foreign Affairs.
• NYSE(NYX) Euronext Sued Over Deutsche Boerse Takeover. NYSE Euronext, the parent company of the New York Stock Exchange, was sued by shareholders seeking to block its planned $9.53 billion sale to Deutsche Boerse AG, a deal that would create the world’s largest owner of equities and derivatives markets. The all-stock transaction is “grossly inadequate” and resulted from a flawed process, lawyers for shareholder Samuel T. Cohen said in a complaint made public today in Delaware Chancery Court in Wilmington. The proposed sale values NYSE at less than targets in similar deals, such as London Stock Exchange Group Plc’s purchase of Canada’s TMX Group Inc., according to the lawsuit. “There appears to have been no sales process, and the proposed transaction did not emerge from an auction,” Cohen’s lawyers said in the complaint. “A board that provides a would- be acquirer with an exclusive opportunity to bid on a company and fails to conduct a market-check, does not act in the interests of shareholders.” Investors said in another lawsuit, filed today in New York Supreme Court, said the sale will result in New York Stock Exchange shareholders owning 40 percent of the acquired company, with the remaining 60 percent held by Deutsche Boerse AG. The sale offers “no meaningful premium to NYSE’s public shareholders” and will “result in a loss of control of the company and its prospects,” according to the complaint.
• Citigroup(C) Gives Senior Executives Stock-Option Bonus on 18 Million Shares. Citigroup Inc., the third-largest U.S. bank by assets, granted 15 executives options on 18.2 million shares as part of their 2010 pay, according to filings. Banks are under pressure to curb bonuses after receiving taxpayer-funded bailouts during the financial crisis of 2008. Citigroup received a $45 billion bailout, some of which the U.S. Treasury converted into a stake in the lender last year. Citigroup last month awarded separate stock bonuses for executives valued at almost $50 million. Six, including Havens, Medina-Mora and Gerspach, also shared “stock salary” last year valued at more than $37 million on an annualized basis, according to a Sep. 24 filing.
• China Money Rate Climbs on Speculation Reserve Ratio Will Rise. China’s benchmark money-market rate jumped the most in a week on speculation the central bank will lift banks’ reserve-requirement ratios to help curb inflation. The People’s Bank of China has ordered lenders to set aside more funds as reserves four times since October in an effort to drain liquidity from the financial system. Consumer prices increased 4.9 percent in January from a year earlier, exceeding policy makers 4 percent inflation ceiling for a fourth month, data showed this week. “There’s fear of a possible reserve-requirement hike very soon,” said Pin Ru Tan, a Singapore-based strategist at Royal Bank of Scotland Group Plc. The seven-day repurchase rate, a gauge of the availability of funds, rose 34 basis points to 2.93 percent, according to a daily fixing from the National Interbank Funding Center published at 11 a.m. in Shanghai. That’s the biggest increase since Feb. 9.
• Fed Tells Banks to Stress-Test Capital for Recession With 11% Unemployment. The Federal Reserve ordered the 19 largest U.S. banks to test their capital levels against a scenario of renewed recession with unemployment rising above 11 percent, said two people with knowledge of the review. The banks stress-tested the performance of their loans, securities, earnings, and capital against at least three possible economic outcomes as part of a broader capital-planning exercise. The banks, including some seeking to increase dividends cut during the financial crisis, submitted their plans last month. The Fed will finish its review in March. “They’re essentially saying, ‘Before you start returning capital to shareholders, let’s make sure banks’ capital bases are strong enough to withstand a double-dip scenario,’ ” said Jonathan Hatcher, a credit strategist specializing in banks at New York-based Jefferies Group Inc. Regulators don’t want to see banks “come crawling back for help later,” he said.

Wall Street Journal:

• Companies Prod SEC on Whistleblower Proposal. Large U.S. companies are asking the Securities and Exchange Commission to require that workers report wrongdoing to employers in order to be eligible for payments under the agency's new "whistleblower" program. Google Inc.(GOOG) and General Electric Co.(GE) are among the more than two dozen companies that have written letters to the SEC, asking the agency to revise its proposed rules for awarding bounties to workers who report information about corporate fraud or wrongdoing.
• China Blocks U.S. Push on Web Freedom. A day after U.S. Secretary of State Hillary Clinton's pledge to promote Internet freedom world-wide, Chinese censors tried to snuff out efforts by U.S. diplomats to generate debate on the issue on Twitter-like microblogs in the country with the world's most Internet users—and its most sophisticated censorship system.
• They Were Best Friends, Until the Feds Showed Up. Donald Longueuil and Noah Freeman were tight. They worked together as money managers at giant hedge fund SAC Capital Advisors. They skated together and vacationed together. And, prosecutors say, they traded on inside information together.
• Study Shows Cancer Drug Avastin Treats Infant Eye Disease. An inexpensive drug therapy far surpassed a conventional laser procedure in fixing a leading cause of blindness in babies born prematurely, according to a new study.
• Big Banks Face Fines on Role of Servicers. A review of mortgage-servicing practices by U.S. regulators found serious problems with internal controls and staffing levels at the companies, which are likely to result in formal enforcement action against more than a dozen major financial institutions, according to people familiar with the situation. The penalties against Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co. and 11 other home-loan servicers being investigated since last fall over breakdowns in procedures for payment collection, loan modifications and foreclosures could include fines and changes in how the companies operate, these people said.
• Outlook for Food Prices: High. Corn to Cotton, Farmers Have Bevy of Planting Choices; Stockpiles Remain Thin.

MarketWatch:

• What JPMorgan(JPM) CEO Knew Is Key To Madoff Suit. J.P. Morgan Chase & Co. Chief Executive James Dimon wasn't informed about a formal report that raised suspicions about Bernard Madoff prior to Madoff's arrest. But he did know about the bank's 2008 decision to pull money from many hedge funds, some of which turned out to be Madoff-related, according to people familiar with the Madoff case. It wasn't until after Mr. Madoff's December 2008 arrest that the CEO was given a full accounting of the firm's exposure and told that some of the funds had ties to Mr. Madoff, these people added.
• 'Toxic' Securities Turn Lucrative for Banks. Investment banks and hedge funds are once again making money from a sector that was defunct only 18 months ago: U.S. mortgage-backed securities, the loan products that spread the credit crunch throughout the world. Only two years later, and despite the fact that many U.S. cities are on the edge of bankruptcy, these securities have turned into one of the most lucrative profit areas for banks, such as Credit Suisse Group, UBS AG or Société Générale SA.

Business Insider:

• ABC Journalist Beaten, And At Least One Is Killed As Protests In Bahrain Turn Violent. The situation in Bahrain is rapidly deteriorating. According to ABC, one of its reporters, Miguel Marquez, has been brutally beaten with billy clubs during a protest. Meanwhile, ForexLive notes reports of at least one more dead, and some gains to gold as the situation deteriorates.
• The 5 Reasons BofA/Merrill Is Crazy About Big Tech Stocks Right Now.
  

Zero Hedge:

• Is Apple's(AAPL) Afterhours Weakness Based On The Assessment Of A Less Than Credible "Doctor?" As is by now well-known, Apple stock is underperforming after hours following reports of an allegedly sickly-looking Steve Jobs leaving the Stanford cancer center. The National Enquirer has released photos supposedly of an emaciated Jobs, yet one who is not readily identifiable as the Apple CEO. The National Enquirer, who initially reported the news today (to be published tomorrow), talked to critical-care physician Dr. Samuel Jacobson, who said, “Judging from the photos, he is close to terminal. I would say he has six weeks.” That said, given the reliability of The National Enquirer, waiting for further news before jumping to conclusions is advised. Furthermore, as TNW reports, "We’ve done a little digging into Dr. Samuel Jacobson. Jacobson appears to be a Florida based pulmonologist (breathing doctor) – not Oncologist. Which would naturally make you wonder just how qualified he is to diagnose someone via a photo, especially outside of his speciality."

New York Times:

• Former Freddie CFO Gets Wells Notice. The former chief financial officer of Freddie Mac has been notified by securities regulators that they may soon file civil charges against him stemming from his tenure at the mortgage finance company, according to a recent public filing. Anthony Piszel, known as Buddy, who was Freddie’s C.F.O. from late 2006 to 2008, received a so-called Wells notice from the Securities and Exchange Commission, an indication the agency is considering an enforcement action against him.
• A Life's Value May Depend on Government Agency. As the players here remake the nation’s vast regulatory system, they have been grappling with a subject that is more the province of poets and philosophers than bureaucrats: what is the value of a human life? The answer determines how much spending the government should require to prevent a single death.

Forbes:

• America's 25 Fastest-Growing Tech Companies.

CNN Money:

• Illinois Governor Proposes Borrowing $8.7 Billion. A month after Illinois lawmakers approved a massive tax hike, Gov. Pat Quinn unveiled Wednesday a $35.4 billion budget that depends on state lawmakers approving $8.75 billion in borrowing largely to clear a towering stack of unpaid bills. The budget, which increases spending by $1.7 billion from the previous year and closes a $13 billion gap, slashes programs for the elderly, the poor and the disabled, but leaves education funding largely untouched. No layoffs of state workers are suggested.

Washington Post:

• North Korea Has Completed Missile Facility, Satellite Imagery Shows. The latest satellite imagery indicates that North Korea has completed construction of a second - and more modern - missile launch facility, a vital step in its efforts to successfully launch intercontinental ballistic missiles. The images, first obtained by VOA News, indicate an expansive launch pad positioned next to a launch tower that stands more than 100 feet tall. Though analysts have known about the facility's construction for at least two years, the site's apparent completion - in spite of scarce domestic resources and international sanctions - suggests that long-range missile development remains a top priority in Pyongyang.

LA Times:

• Bell 8: Six Officials Ordered to Stand Trial for Looting City Treasury. Six current or former Bell City Council members were ordered Wednesday to stand trial on felony charges that they drew extraordinary salaries for serving on boards and commissions that met so rarely that one elected official testified that he wasn’t even sure what the agencies did.

AppleInsider:

• Apple's(AAPL) Steve Jobs to Meet With President Obama on Thursday. Apple CEO Steve Jobs will reportedly join Google chief executive Eric Schmidt and Facebook founder Mark Zuckerberg in a meeting with US President Barack Obama in San Francisco on Thursday. Though recent reports have alleged that Jobs' health has continued to decline, the executive is scheduled to attend a business leaders' event with President Obama Thursday evening, a source told ABC News.

Politico:

• Dianne Feinstein: U.S. Intel Missed Warnings in Egypt. The chairwoman of the Senate Select Committee on Intelligence argued Wednesday that the U.S. intelligence community largely missed early warning signs of the unrest that ousted Egyptian President Hosni Mubarak last week, in part because American officials paid little attention to social media tools like Twitter and Facebook. “I mean, I’m not a big computer person, but I looked at Facebook, and I am not a member of Facebook, but you could get right in and you could see everything about it,” committee Chairwoman Dianne Feinstein (D-Calif.) said at an annual hearing on worldwide threats. “It seems to me that this ought to be watched very carefully to be able to give our policymakers and our leadership some advance notice, and I think we were at fault in that regard.”
• House GOPers Propose Amendments to Defund Health Care Law. Among the dozens of amendments filed last night with the House Rules Committee are two that would attempt to defund the Democratic health care law passed last year. The limitation amendments are offered by Reps. Denny Rehberg (R-Mont.) and Cathy McMorris Rogers (R-Wash.). The measures will be voted along with the rest of the continuing resolution on Thursday. Rehberg’s amendment specifies that no “funds made available by this act may be paid to any employee, officer, contractor, or grantee of any department or agency…to implement the provisions of” the law. McMorris Rogers’ amendment takes aim at Internal Revenue Service officers. Like Republicans' previous attempt to pull the plug on the health care law, the Democrat-controlled Senate has shown no interest in defunding the law.
• Darrell Issa's First Subpoena Targets Countrywide VIP Program. House Oversight and Government Reform Committee Chairman Darrell Issa’s first subpoena takes aim at Countrywide Financial’s VIP program, launching a probe that seeks to out lawmakers who got sweetheart terms on home loans. The California Republican issued an unusually wide-ranging subpoena for documents about the defunct lender’s program, demanding names, addresses and e-mail exchanges of all those involved, a major expansion of an inquiry launched in the preceding Congress.
  

Rasmussen Reports:

• 55% Say Obama's Budget Doesn't Cut Enough. 10% say it cuts too much.

Reuters:

• Williams(WMB) to Split in Two; Shares Surge. Williams Cos said on Wednesday it plans to split the company's pipeline and exploration businesses into two separate publicly traded entities, sending its shares up 12 percent. The U.S. company expects the split to speed up growth and increase the valuation of its assets, it said. Williams' board also raised the dividend 60 percent in the first quarter, with additional increases of 10 percent to 15 percent targeted for dividends paid starting in June 2012.
• FDA Approves Wider Use of Allergan(AGN) Stomach Band. The U.S. Food and Drug Administration approved expanded use of Allergan Inc's stomach band, allowing it to be implanted in people who are less obese than those now approved as candidates for the weight-loss surgery, the drug company said on Wednesday.
• U.S. Risk Council Breaks Non-Bank World Into Four. The new U.S. financial risk council has divided non-bank financial institutions that could be subject to additional oversight into four categories, including hedge funds and insurers. The Dodd-Frank law gives the government the authority to seize a large, failing financial institution so that it can be liquidated without causing too much chaos in the financial markets, such as occurred when Lehman Brothers went bankrupt in September of 2008. Under this system, the new Financial Stability Oversight Council is supposed to designate financial firms other than banks that are "predominantly engaged in financial activities" and could pose a threat to financial markets. These firms will be overseen by the Federal Reserve.
• Libyan Online Protesters Prepare For "day of rage". Protesters in Libya were planning to take to the streets for a "day of rage," on Thursday inspired by uprisings in Egypt and Tunisia, but rights groups warned of a possible crackdown by security forces. In a country where public dissent is rare, plans for the protests were being circulated by anonymous activists on social networking sites such as Facebook and Twitter, and it was not clear if the demonstrations would materialise.
• Gresham - CFTC Limits Unfairly "insulate" Ag Markets.
• Nvidia(NVDA) Sees Strong Q1 as Mobile Chip Takes Off. Nvidia Corp forecast quarterly revenue above expectations and said revenue of its Tegra 2 mobile chips were accelerating. Sales of Nvidia's new mobile chips in the current quarter will become larger than revenue from its dwindling chipset business and grow over the year as a next-generation processor also hits the market, executives said. Nvidia's shares lost ground in after hours trade as some investors focused on the company's rising operating expenses.
• US Senator Pushes For Oil Sands Pipeline Approval. A leading Republican Senator on Wednesday called for the White House to approve the Keystone pipeline that would transport crude from Canadian oil sands to the Gulf coast. "Boosting trade with Canada offers tremendous opportunity to improve our energy security," Lugar said in a speech to the Alliance to Save Energy. "This pipeline is critical to American efforts to enhance the reliability of our oil supplies," he added. Lugar said the United States is too dependent on oil from hostile nations and the government must work to decrease vulnerability to supply shocks from the Middle East.
• NetApp's(NTAP) Profit Outlook Disappoints, Shares Fall. Data storage equipment maker NetApp Inc. gave a weaker-than-expected profit forecast, blaming a components shortage, pushing the company's shares down 4 percent.
• Miner Cliffs(CLF) Tops Profit Estimate, Stock Up 10%. Cliffs Natural Resources Inc reported a better-than-expected surge in quarterly profit as demand and prices for its iron ore and steel-making coal soared, and its shares rose nearly 10 percent.
• Rubicon(RBCN) Q4 Tops Est; Sees Strong Q1 On Robust Demand. Rubicon Technology Inc's quarterly results trumped market estimates and the electronic materials provider forecast a robust first quarter helped by increasing demand from LED chip manufacturers, sending its shares up 14 percent in extended trade.

South China Morning Post:

• One-Third of Chinese Mainland Firms Plan Pay Raises. One-third of foreign businesses on the mainland are expected to raise wages by more than 10 per cent this year as companies compete in the fast-growing market where highly skilled employees are in short supply.

Shanghai Securities News:

• China's consumer prices may rise about 5.2% in February compared with a year earlier, Xu Pingsheng, a researcher with the State Information Center, wrote in a commentary. Food and residence-related prices drove the increase, Xu wrote.

Evening Recommendations
Citigroup:

• Reiterated Buy on (WCG), target raised to $44.
• Reiterated Buy on (OC), target raised to $47.
• Reiterated Buy on (RIG), target raised to $88.
• Reiterated Buy on (JAH), target raised to $50.

Night Trading

• Asian equity indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 106.50 -2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 121.0 -.5 basis point.
  
• S&P 500 futures -.17%.
  
• NASDAQ 100 futures -.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CPO)/.75
• (STRA)/2.66
• (WTW)/.55
• (H)/.06
• (PCG)/.72
• (EOG)/.26
• (DPS)/.64
• (TBL)/.50
• (WMB)/.28
• (SPW)/1.10
• (SJM)/1.26
• (DUK)/.23
• (TRW)/1.24
• (TTC)/.41
• (JWN)/.99
• (SPWRA)/1.01
• (CECO)/.78
• (CF)/2.65
• (RRGB)/.04
• (INTU)/.31
• (BUCY)/1.30
• (APA)/2.45
• (VMI)/1.13
  

Economic Releases
8:30 am EST

• The Consumer Price Index for January is estimated to rise +.3% versus a +.5% gain in December.
• The CPI Ex Food & Energy for January is estimated to rise +.1% versus a +.1% gain in December.
• Initial Jobless Claims for last week are estimated to rise to 400K versus 383K the prior week.
• Continuing Claims are estimated to rise to 3893K versus 3888K prior.
  

10:00 am EST

• Leading Indicators for January are estimated to rise +.2% versus a +1.0% gain in December.
• Philly Fed for February is estimated to rise to 21.0 versus a reading of 19.3 in January.
  

Upcoming Splits

• (SFUN) 4-for-1
  

Other Potential Market Movers

• The Fed's Evans speaking, $9 Billion 30-Year TIPS Auction, 4Q Mortgage Delinquencies, 4Q Mortgage Foreclosures, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index, Oppenheimer Semi Summit, Keefe Bruyette Woods Cards/Payments/Financial Tech Symposium, (DUK) investor meeting, (DIS) investor conference and the (JDSU) analyst day could also impact trading today.
  

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