Friday Watch

Evening Headlines
Bloomberg:

• Libya Rebels Snub Chavez Mediation, Press Fight to Oust Qaddafi. Libyan opposition leaders rejected a mediation offer by Venezuelan President Hugo Chavez, an ally of Muammar Qaddafi, as armed rebels held out against regime attacks and prepared to push toward the capital of Tripoli. The Arab League held talks with Venezuela about Chavez’s call for a “mediation commission,” a league official, Hesham Youssef, said by telephone yesterday. Chavez said he spoke with Qaddafi about the proposal. Oil headed for a third weekly gain on concerns over the spreading Middle East unrest, while Gulf shares extended declines. The plan, which would involve what Venezuela called “friendly” nations, is a non-starter with the rebels, whose spokesman said Qaddafi “knows the way to the airport and he can leave.”
• Crude Oil Heads for Third Weekly Gain as Unrest Spreads Through Middle East. Oil headed for its third weekly gain in New York as unrest that has curbed crude exports from Libya spreads to the Middle East. Futures fluctuated near $102 a barrel today, paring earlier losses on signs the U.S. economic recovery is gaining strength. Libyan opposition leaders have rejected a mediation offer by Venezuelan President Hugo Chavez, an ally of Muammar Qaddafi, as rebels held out against regime attacks. Turmoil that has cut as much as 1 million barrels a day of Libya’s output threatened to spill over into Iran this week, OPEC’s second-largest producer. “It’s fear and the expectation that this unrest could spread” that has driven oil higher, Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, said by telephone today. Crude for April delivery traded at $101.94 a barrel, up 3 cents, at 8:49 a.m. Singapore time in electronic trading on the New York Mercantile Exchange. Futures are headed for a 4.1 percent gain in the past seven days after surging 14 percent a week earlier.
• CDO, CDS Fraud Probes to Be 2011 Priority, New York U.S. Prosecutor Says. U.S. criminal investigators will step up probes into possible fraud involving collateralized debt obligations and credit default swaps, a top federal prosecutor in New York said. Christopher Garcia, chief of the Securities and Commodities Fraud Task Force in the U.S. Attorney’s Office in Manhattan, told white-collar criminal-defense lawyers at a conference today that his office will spend this year investigating possible fraud involving CDOs and CDSs. “If there’s crime there, we’re going to find it and we’re going to pursue it,” Garcia said at an American Bar Association meeting in San Diego. Investigators won’t be deterred by the complexity of the financial instruments, he said. Garcia said in an interview after his presentation that his office is “bringing in people with expertise in these areas.” “It’s an enforcement priority,” he said.
• Greenspan Says Surge in Government 'Activism' is Hampering U.S. Recovery. Former Federal Reserve Chairman Alan Greenspan said a surge in U.S. government “activism,” including fiscal stimulus, housing subsidies and new regulations, is holding back the economic recovery. Increased bond issuance by the Treasury Department crowds out borrowers with the weakest credit ratings, Greenspan said in an article in International Finance, published on the Web today. At least half of the shortfall in companies’ capital spending “can be explained by the shock of vastly greater government- created uncertainties embedded in the competitive, regulatory and financial environments” since the failure of Lehman Brothers Holdings Inc. (LEHMQ) in 2008, Greenspan said. “Much intervention turns out to hobble markets rather than enhancing them,” said Greenspan, 84, who was appointed Fed chairman by Republican President Ronald Reagan in 1987 and served until 2006. “Any withdrawal of action to allow the economy to heal could restore some, or much, of the dynamic of the pre-crisis decade, without its imbalances.”
• Wen Sees Billionaires in China Congress as Wealth Gap Widens. As Chinese Premier Wen Jiabao this week opens the annual gathering of the National People’s Congress with a pledge to shrink China’s wealth gap, his challenge will be reflected in the makeup of the assembly itself. The richest 70 of the 2,987 members have a combined wealth of 493.1 billion yuan ($75.1 billion), and include China’s richest man, Hangzhou Wahaha Group Chairman Zong Qinghou, according to the research group Hurun Report. By comparison, the wealthiest 70 people in the 535-member U.S. House and Senate, who represent a country with about 10 times China’s per-capita income, had a maximum combined wealth of $4.8 billion, data from the Washington-based Center for Responsive Politics show.
• North Korea Tells South Korea to Return All 31 Nationals Rescued From Boat. North Korea demanded South Korea return all 31 of its nationals who drifted across the western sea border by boat last month after four of them said they didn’t want to return home. The government in Seoul “pressured them to remain in South Korea by appeasement, deception and threat,” North Korea’s Red Cross said late yesterday in a statement carried by the state- run Korean Central News Agency. “This cannot be interpreted otherwise than a grave provocation.”
• Insider-Trading Probes Send Investors Scurrying Even When No One's Charged. On the morning of Feb. 11, David Ganek gathered employees in the New York offices of Level Global Investors LP to tell them he was shutting the hedge fund he co- founded eight years earlier.

Wall Street Journal:

• Fear Stalks the Streets of Gadhafi's Capital. The residents of Libya's capital, subject to a clampdown as Col. Moammar Gadhafi loses much of the rest of his country to opponents, are gripped by fear and paranoia. Pro-Gadhafi security forces, visiting homes at night, have made scores of arrests. Families of some antigovernment activists have gone into hiding after receiving threats from officials. Doctors say patients with gunshot wounds—a sign the injured person may have been at a street demonstration—have been arrested and taken from hospitals. Some residents of Tripoli, home to two million of Libya's six million people, on Thursday described these and other incidents that form what they say is a tapestry of terror in the capital. As Col. Gadhafi has rallied his base, these people say, reprisals have escalated against those who protest his rule. Political uncertainty has warped the fabric of once-quiet neighborhoods, residents say, with some saying they are afraid to speak to longtime neighbors.
  
• GOP Aims to Tame Benefits Programs. House Speaker John Boehner said Thursday that he's determined to offer a budget this spring that curbs Social Security and Medicare, despite the political risks, and that Republicans will try to persuade voters that sacrifices are needed. In an interview with The Wall Street Journal, Mr. Boehner said House Republicans would offer a budget for the next fiscal year that sets goals for bringing the programs' costs under control. But he acknowledged that Americans are not yet ready to embrace far-reaching changes to Social Security and Medicare because they are not aware of the magnitude of the financial problems.
• Pressure Mounts on Absent Democrats. Republican lawmakers in Wisconsin and Indiana ratcheted up pressure on their absent Democratic colleagues Thursday, aiming to force an end to standoffs over bills that would limit public workers' bargaining rights. In Wisconsin, GOP senators unanimously passed a resolution finding their 14 Democratic colleagues in contempt. They ordered the Democrats to return to the Senate in Madison by 4 p.m.—and threatened them with arrest if they failed to comply. Indiana House Republicans moved to start fining missing Democrats $250 a day, beginning Monday.
• AOL(AOL) Says Huffington Post Deal Could Include Layoffs. Internet company AOL could lay off a portion of its employees following its acquisition of online news commentary site Huffington Post, AOL CEO Tim Armstrong said Thursday during an industry conference.
• US Offers Maine Wind Power Project $102 Million Loan Guarantee. The U.S. Energy Department on Thursday offered a $102 million loan guarantee to a proposed wind farm in western Maine.
• Lawmakers Ask SEC to Scale Back Muni Proposal. A growing chorus of lawmakers in the House and Senate is urging the Securities and Exchange Commission to scale back a broad proposal that would require federal registration and oversight of advisers to states and localities that sell municipal bonds. Already drawing protests from hundreds of local officials, the proposal is under scrutiny by House Financial Services Committee chairman Spencer Bachus (R., Ala.) as well as Sen. Orrin Hatch (R., Utah), the ranking Republican on the Senate Finance Committee.
• Networks Brace for NFL Hit. With a possible lockout of National Football League players looming, cable and broadcast companies are girding themselves for the loss of games at a time when the NFL has become one of the most important brands on television.
• Goldman's(GS) Blankfein Agrees to Testify at Insider-Trading Trial. Wall Street's best-known executive could be a surprising government witness at the high-profile criminal trial of Raj Rajaratnam. Goldman Sachs Group Inc. Chief Executive Lloyd C. Blankfein has agreed to testify for the U.S. government at the coming trial of Mr. Rajaratnam, the hedge-fund titan facing insider-trading charges, according to people familiar with the matter.
• Regulators Consider 10% Down Payment for Homes. Federal regulators are likely to issue two different proposals in forthcoming mortgage-lending rules for loans classified as lower-risk: one calling for a minimum 20% down payment; and another recommending a 10% down payment, according to people familiar with the matter. The proposal by six different federal agencies is part of an effort to rewrite rules for mortgage lending as part of the Dodd-Frank financial overhaul law enacted last year. The law requires banks to hold a portion of loans that are bundled and sold as securities, but it allowed regulators to exempt certain gold-standard residential mortgages from the costly new requirement. The debate over what regulators should classify as a so-called "qualified residential mortgage" could have sweeping implications for the U.S. mortgage market.

Bloomberg Businessweek:

• The Best Undergraduate B-Schools of 2011. With U.S. job growth still weak, business programs that top the latest Bloomberg Businessweek ranking are going global in a big way.

CNBC:

• Europe's Rising Rates Could Hurt Euro Zone Weaklings.
• China's 2011 Defense Budget Rises Nearly 13% to $91.5 Billion.
  

MarketWatch:

• China Central Bank to Revamp Money-Supply Measure. The People’s Bank of China has introduced new measures designed to improve statistical tracking of the nation’s money supply by including funds flowing through a wider variety of financial channels.

Business Insider:

• Bill Gates: States' Ridiculous Budget and Pension Accounting "Would Make Enron Blush".
• Saudi Arabia's Regime Will Fall, Says Analyst. As Libya descends into full-on civil war and protests spread across the rest of the Middle East, all eyes are focused on Saudi Arabia, which produces more than 10% of the world's oil. So far, protests in Saudi Arabia have been limited. But our guest, Fadel Gheit, a managing director at Oppenheimer & Co., thinks that may soon change.
• Chart of the Day: 99.7% of People Still Haven't Bought a Tablet Yet.
  

Zero Hedge:

• Fed Balance Sheet Hits New Record at $2.55 Trillion as Bank Reserves Hit $1.3 Trillion All Time High. (graphs)
• When Even John Taylor Says Bernanke's Interpretation of the Taylor Rule is Wrong. So is the entire US monetary policy based on a rule derivative that is not even endorsed by its creator? The answer is a resounding yes.
• Portugal, Which Has €20 Billion In Bond Maturity And Deficit Outflows In 2011, Has Only €4 Billion In Cash.
• Forget The Middle East, Spain Is Still The Elephant In The European Room!
  

IBD:

• Oracle(ORCL) Now a One-Stop Shop for Business Computing.

New York Times:

• Galleon Lawyers Accuse SEC of Tainting Jury. Lawyers for Raj Rajaratnam have accused the government of a deliberate attempt to taint the jury pool less than a week before the billionaire hedge fund manager goes on trial on charges of insider trading.
• In Price of Farmland, Echoes of Another Boom.
  

Forbes:

• Goldman(GS) Ups Apple(AAPL) Estimate on iPad 2. Apple estimates were increased today by Goldman Sachs through 2013, as the firm believes that the iPad 2 will be a sales catalyst for the company. Goldman issued a buy rating with a $450 price target.
  

CNN Money:

• World's Most Admired Companies.
• Wordpress Hammered by Massive DDoS Attack. One of the Web's largest blog hosting sites, Wordpress, struggled to keep functioning Thursday through a massive distributed denial of service (DDoS) attack. Matt Mullenweg, Wordpress' founding developer, called the assault "the largest and most sustained attack we've seen in our six year history." Its effects hit all three data centers run by Automattic, the San Francisco developer that owns Wordpress. "It's currently been neutralized, but it's possible it could flare up again later," Mullenweg said Thursday afternoon. "We suspect it may have been politically motivated against one of our non-English blogs, but we're still investigating and have no definitive evidence yet."

Washington Post:

• Ex-FBI Agent Who Disappeared in Iran is Alive, Clinton Says. A retired FBI agent who vanished in 2007 while investigating a smuggling case in Iran is apparently alive, Secretary of State Hillary Rodham Clinton said Thursday in a statement that deepened the mystery surrounding the man's nearly four-year-old disappearance. Robert Levinson, 63, who disappeared during a visit to the Iranian resort island of Kish, apparently is being held "somewhere in southwest Asia," Clinton said, citing unspecified evidence received by the State Department.
• Republicans Decry SEC Chairman's Response to Madoff Fraud. Two senior Republicans accused Securities and Exchange Commission Chairman Mary L. Schapiro on Thursday of mishandling potential conflicts of interest during her agency's response to Bernard Madoff's epic Ponzi scheme. Rep. Darrell Issa, chairman of the House Oversight and Government Reform Committee, and Sen. Charles E. Grassley of Iowa, ranking member of the Senate Judiciary Committee, said in a statement that Schapiro had allowed her general counsel to represent the agency on Madoff issues "without fully properly examining" his financial interest. The Republicans' criticism was the toughest since it came to light that former SEC general counsel David M. Becker and his brothers inherited and then liquidated a $2 million Madoff account years before the 2008 collapse of Madoff's fraud. Becker rejoined the SEC as general counsel in early 2009 and left the agency last week.

Lloyd's List:

• Europe-Asia Container Rates War Loom as Lines Undercut Rivals. MAJOR freight forwarders on the Asia-Europe westbound leg have raised concerns that the trade may once again be on the brink of a damaging freight rate war.

Seeking Alpha:

• Squeeze Ideas: 20 Biotech Stocks Targeted by Short Sellers.

Market News International:

• The European economy faces an inflation threat, citing Wang Jianxi, deputy general manager of China Investment Corp. Emerging markets also face a "very serious" threat of rising prices, Wang said. The European debt problem hasn't been fully resolved, Wang said.

Reuters:

• Wal-Mart(WMT) Hikes Dividend 20.6%. Wal-Mart Stores Inc said it is increasing its annual dividend nearly 21 percent, citing its ability to generate cash in a fiscal year that disappointed investors with weak U.S. sales. Wal-Mart said its board approved a dividend of $1.46 per year in fiscal 2012, which ends next January, up from $1.21. That translates to about $5.2 billion paid out to shareholders. The move would bring Wal-Mart's dividend yield to 2.81 percent, based on its closing stock price of $52.01 on Thursday on the New York Stock Exchange.
• Juniper(JNPR) Sees Market Growing to $66 Billion in 3 Years. Juniper Networks Inc said it expects its market opportunity to grow more than 60 percent over the next three years, as it launches more advanced network equipment and enters new markets like mobile security.
• ETFs Lead Inflows into US Equity Funds - Lipper.
• Cooper Cos(COO) Q1 Tops Street, Raises FY View. Cooper Cos Inc posted a quarterly profit that topped market expectations on strong revenue and better margins, and the contact lens maker raised its earnings and revenue forecast for the fiscal 2011.
• SAC Gains in February, Pershing Swings to Gains. Hedge fund managers are slowly telling investors how they performed in February and some firms appear to have scored better returns than at the start of the year when returns were more mixed. Steven Cohen's SAC Capital Advisors, famous for years of eye-popping returns, inched up 1.15 percent last month, an investor said. In January, the $13 billion fund gained 1.75 percent.

Foreign Policy:

• At UN, The Inmates are Running the Asylum. Libya's tenure on the U.N. Human Rights Council is just the latest example of how the international system has been hijacked by the world's most repressive regimes. The recent unrest in parts of the Arab world has not only exposed the appalling lack of development in these countries, but also a number of fundamental deficiencies in the international system. The United Nations, which began its life with a plurality of democratic nations, now allows for an automatic majority of nondemocratic nations. The international system dictates that Arab and Islamic nations, and their knee-jerk defenders, have a majority in almost all of its bodies. This is amply demonstrated by the disproportionate amount of time spent condemning Israel.

Financial Times:

• Foxconn Technology Group will move 200,000 jobs inland from its manufacturing plants in Shenzhen to cut costs, citing Louis Woo, special assistant to Chairman Terry Gou. The company plans to shift all of its "mass manufacturing" to other sites and will make Shenzhen its "engineering campus," the report said.
• Air fares could rise by as much as 40 euros a ticket after the European Union's emissions-trading plan adds extra costs to airlines from the beginning of 2012, citing a report by S&P.
  

Xinhua:

• BYD Co.'s February auto sales fell 22% to 26,521 units from the previous year.

Evening Recommendations
Citigroup:

• Reiterated Buy on (MGA), target $61.
• Reiterated Buy on (TOO), target $33.

Night Trading

• Asian equity indices are +.75% to +1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 107.0 -2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 118.0 -2.0 basis points.
  
• S&P 500 futures +.07%.
  
• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note
  

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for February is estimated at 196K versus 36K in January.
• The Change in Private Payrolls for February is estimated at 200K versus 50K in January.
• The Unemployment Rate for February is estimated to rise to 9.1% versus 9.0% in January.
• Average Hourly Earnings for February is estimated to rise +.2% versus a +.4% gain in January.
  

10:00 am EST

• Factory Orders for January are estimated to rise +2.0% versus a +.2% gain in December.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's Nelson speaking, (AET) investor conference and the (HW) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the day.

Stocks Soaring into Final Hour on Falling Energy Prices, More Economic Optimism, Short-Covering, Fund Inflows

Broad Market Tone:

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

Equity Investor Angst:

• VIX 18.26 -11.69%
  
• ISE Sentiment Index 126.0 +18.87%
  
• Total Put/Call .85 unch.
  
• NYSE Arms .68 -36.61%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 82.77 -1.16%
  
• European Financial Sector CDS Index 111.17 -4.86%
  
• Western Europe Sovereign Debt CDS Index 172.83 bps unch.
  
• Emerging Market CDS Index 212.64 -4.16%
  
• 2-Year Swap Spread 20.0 unch.
  
• TED Spread 19.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% unch.
  
• Yield Curve 279.0 unch.
  
• China Import Iron Ore Spot $177.90/Metric Tonne -.06%
  
• Citi US Economic Surprise Index +86.10 +2.5 points
  
• 10-Year TIPS Spread 2.50% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +139 open in Japan
• DAX Futures: Indicating +51 open in Germany

Portfolio:

• Higher: On gains in my Technology, Retail, Medical and Biotech longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges, covered some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades near session highs, despite just a small drop in oil, Mideast unrest, higher long-term rates and emerging markets inflation fears. On the positive side, Airline, Road & Rail, Restaurant, Construction, HMO, Medical, Wireless, Computer Service, Networking, Semi, Steel, Coal and Defense shares are especially strong, rising more than 2.0%. Small-cap and Cyclical shares are outperforming again. (XLF) has traded well throughout the day. The US Muni CDS Index is declining -4.36% to 153.06 bps. The Russia sovereign cds is dropping -6.68% to 127.69 bps and the Belgium sovereign cds is falling 4.28% to 162.0 bps. Moreover, the Saudi sovereign cds is falling -5.68% to 134.24 bps despite reports of more protests in the kingdom. Oil is falling -.47% and gold is -1.58% lower on the day. Lumber is gaining +3.28%. On the negative side, Telecom shares are lower on the day. Retail is also underperforming. The 10-year yield is rising +10 bps to 3.57%. The Portugal sovereign cds is rising +1.5% to 469.66 bps. The avg. US price for a gallon of gas is up another .04/gallon today to $3.43/gallon. It is now up .31/gallon in 16 days. The US dollar is trading very poorly again today given the data and recent euro gains in anticipation of hawkish ECB commentary. Investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Oil is just barely down today despite positive developments in Libya and Saudi's "day of rage" is looming next week. The equity market remains extraordinarily resilient. I still believe this is a result of investors' anticipating a likely better-than-expected February jobs report on Fri. Stocks will likely build on today's gains tomorrow unless oil or rates start moving up too much. I expect US stocks to trade mixed-to-higher into the close from current levels on more economic optimism, lower energy prices, short-covering, technical buying and fund inflows.

Today's Headlines

Bloomberg:

• Oil Declines Most in a Week on Arab League's Libya Crisis Resolution Plan. Oil slipped for the first time in three days in New York after Venezuela offered to mediate a resolution to the crisis in Libya, which has cut crude supplies from Africa’s third-biggest producer. Crude dropped the most in a week after the Arab League said it’s weighing an offer by Venezuela’s Hugo Chavez to intervene in Libya’s civil conflict. Prices may be starting to hurt global economic growth, said Adam Sieminski, chief energy economist at Deutsche Bank AG. “Things still look grim in Libya, with all the signs of a prolonged conflict that will severely hamper oil and gas exports,” said Christopher Bellew, senior broker with Bache Commodities Ltd. in London. Crude for April delivery slid as much as $1.86, the biggest decline since Feb. 24, to $100.37 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.19 at 1:34 p.m. in London.
• World Food Prices Increase to a Record, United Nations Says. Global food prices rose to a record in February and grain costs may continue to rise in the next several months, with only rice keeping the world from a repeat of the crisis three years ago, the United Nations said. An index of 55 food commodities rose 2.2 percent to 236 points from 230.7 in January, the eighth consecutive gain, the UN’s Food and Agriculture Organization said today. Wheat rose as much as 58 percent on the Chicago Board of Trade in the past 12 months, corn gained 87 percent and rice added 6.5 percent. “I’ve never loved rice more than now,” Abdolreza Abbassian, a senior economist at the FAO in Rome, said by phone. The grain is the staple food of more than half of the world population, according to the International Rice Research Institute. “Probably rice is the commodity which is separating us from a food crisis,” Abbassian said. Turmoil in oil-producing countries including Libya has pushed crude above $100 a barrel, which may drive corn and wheat prices even higher, Abbassian said. Higher crude prices make biofuels produced from crops more competitive while raising the cost of tractor fuel and fertilizer for farmers. “The hike in food prices is deeply worrying,” Thierry Kesteloot, a food-policy adviser at Oxford, England-based hunger-relief charity Oxfam, said in an e-mailed statement. “Millions more people are sliding into poverty as they struggle to afford basic food supplies, and more and more are at risk of going hungry.” The World Bank said last month 44 million people have been forced into extreme poverty since June by food inflation. The UN’s food-price index rose 34 percent from 175.9 points a year earlier, with all five food groups advancing.
• U.S. Service Industries Grow at Fastest Pace in Five Years. Service industries expanded more than forecast in February, showing the U.S. expansion has broadened beyond manufacturing. The Institute for Supply Management’s index of non- manufacturing businesses increased to 59.7, the highest level since August 2005, from 59.4 in January. Economists forecast the gauge would fall to 59.3, according to the median estimate in a Bloomberg News survey. The group’s employment gauge increased to 55.6, the highest since April 2006, from 54.5 a month earlier. The index of prices paid jumped to 73.3 from 72.1. Other reports today showed consumer confidence held near a three-year high last week as more Americans said their finances were in good shape, and claims for jobless benefits unexpectedly dropped. The Bloomberg Consumer Comfort Index, formerly the ABC News U.S. Weekly Consumer Comfort Index, was minus 39.3 in the period to Feb. 27, compared with minus 39.2 the prior week. Respondents’ view of their financial situation climbed to an almost two-year high. At the same time, rising food and fuel costs may strain household budgets. The cost of gasoline advanced 8.8 percent last month, with regular fuel averaging $3.17 a gallon in February, according to AAA, the nation’s largest motorist organization. It reached $3.39 a gallon on March 1, the highest price since October 2008. The number of applications for unemployment insurance payments fell by 20,000 to 368,000 in the week ended Feb. 26, according to the Labor Department. Economists forecast claims would climb to 395,000, according to the median estimate in a Bloomberg survey.
• Shanghai Stocks Fall on Concern Economic Growth is Slowing, CPI Rising. China’s stocks fell, driving down the benchmark index by the most in a week, on concern higher material prices will fuel inflation and the nation’s tightening policies are slowing the world’s second-biggest economy.
• Merkel Digs In On Bailout Terms as Discord Mars European Debt Crisis Talks. German Chancellor Angela Merkel is digging in against easing bailout conditions as haggling over a blueprint to end the euro debt crisis enters its home stretch. With the European Union nearing its March 25 deadline for a reinforced plan to aid debt-strapped countries, Merkel has told parliamentary allies that a deal was unlikely on cutting rescue- loan rates, a sign that German officials are stepping back from a willingness to forge a grand bargain to protect the euro.
• Frankfurt Airport Gun Suspect May Be 'Radicalized Muslim' Who Acted Alone. The Kosovar man suspected of killing two U.S. airmen yesterday at Frankfurt Airport during a personnel transfer to Afghanistan, may be a “radicalized Muslim” acting alone, a German state official said. The alleged gunman, a 21-year-old postal worker at the airport who wasn’t based in a high-security area, admitted to the attack, said Boris Rhein, interior minister of the state of Hesse. The suspect, previously unknown to authorities, was arrested while fleeing to the terminal when his gun jammed as he was attacking the U.S. military bus picking up the airmen, Rhein said today. Relatives of the suspect in Kosovo described him as a devout Muslim who was born and raised in Germany and worked at the airport, the Associated Press reported, citing an uncle identified as Rexhep Uka.
• Trichet Says ECB May Raise Rates, Show 'Strong Vigilance'. European Central Bank President Jean-Claude Trichet said the ECB may raise interest rates next month for the first time in almost three years to fight mounting inflation pressures. An “increase of interest rates in the next meeting is possible,” Trichet told reporters in Frankfurt today after the central bank set its benchmark rate at a record low of 1 percent for a 23rd month. “Strong vigilance is warranted,” he said, adding that any move would not necessarily be the start of a “series.” The comments surprised economists and investors, most of whom hadn’t expected the ECB to raise rates before August.
• EU Banks Face 50% Capital Surcharge on Private-Equity Stakes. European banks will have to hold 50 percent more capital in reserve against investments in private equity and hedge funds under draft capital rules being considered by the European Union to curb risk. Lenders will have to price risky investments at one-and-a- half times their current value, according to a draft European Commission document obtained by Bloomberg News, and so hold more regulatory capital against those holdings on their balance sheets to cover potential losses. The higher-risk categories include “investments in venture capital firms, private equity investments, hedge funds and speculative real estate financing and investments,” according to the undated document.
• Fink Says He's a 'Big Buyer' of Dollars That Gross Says Avoid. BlackRock Inc. (BLK)’s Laurence D. Fink, chief executive officer of the world’s largest asset manager, said he’s a “big buyer” of the U.S. dollar, which rival Bill Gross has urged investors to avoid. Fink, 58, doesn’t see a “bear market” in bonds and would buy U.S. Treasuries if yields rise above 4 percent, he said today in an interview from New York with Bloomberg Television’s Erik Schatzker. Gross, manager of the world’s largest mutual fund, has said the best days for bonds are over. He has cut holdings in U.S. government debt to the smallest level in two years, while boosting non-dollar securities. “We believe rates will creep up,” Fink said. Still, with inflation likely to be muted, “we’re not calling that a bear market.”
• No Sex for Almost 30% of Americans Under 24 as Virginity Jumps. Almost a third of Americans ages 15 to 24 say they have never had sexual contact with another person, a higher percentage than in a 2002 survey, according to a U.S. government study. Of those surveyed by the Centers for Disease Control and Prevention, 27 percent of men and 29 percent of women ages 15 to 24 reported being virgins, the Atlanta-based agency said today. In the previous study, about 22 percent of males and females 15 to 24 said they never had sex.
• iPad, Rival Tablet Demand Crimping Personal-Computer Growth, Gartner Says. Personal-computer shipments will grow at a slower pace than previously forecast as consumers reach for Apple Inc. (AAPL)’s iPad and other tablet devices, Gartner Inc. (IT) said. Gartner lowered its projection for worldwide shipments this year to 387.8 million units, or 10.5 percent growth, from an earlier projection of 15.9 percent growth, according to a report today. The Stamford, Connecticut-based research firm cited decreased demand for laptop computers as the main reason. The recalculation is also the result of a slowdown in China of mobile-PC sales, Gartner said. Laptops and simpler netbooks have driven growth in the global computer market during the past five years. Consumers who used those devices to e-mail and search the Web are now often turning to tablets. In addition, laptop owners are holding on to their machines longer instead of buying new ones, Gartner said. “We expect growing consumer enthusiasm for mobile-PC alternatives, such as the iPad and other media tablets, to dramatically slow home mobile-PC sales, especially in mature markets,” said George Shiffler, a research director at Gartner.
• Egypt Stock Exchange Postpones Opening Again After Prime Minister Quits. Egypt’s bourse, home to the world’s worst performing benchmark index this year, postponed plans to resume trading for the second time in a week after Prime Minister Ahmed Shafik quit. No date was given for the opening.

Wall Street Journal:

• California Cap-and-Trade Faces Potential Hurdle. California's cap-and-trade program is being threatened by groups of local residents, even after the ambitious climate plan survived an electoral challenge in November. Communities For A Better Environment, California Communities Against Toxics, Society For Positive Action and other groups and individuals have sued state regulators, claiming the climate plan won't reduce pollution. The plaintiffs argue that industrial facilities should cut their actual emissions, rather than trade rights to pollute. "All the evidence showed that cap-and-trade programs have failed environmental justice communities," said Alegria de la Cruz, an attorney with the Center on Race, Poverty & The Environment, who is representing the plaintiffs.
• IEA: Libya Unrest Starting to Hit Oil Supplies. Unrest in Libya is starting to affect Europe's oil supplies, although no member country of the International Energy Agency has requested permission to release strategic oil stocks, IEA Executive Director Nobuo Tanaka said Thursday. "This disruption is starting to have an impact, especially on European countries," Mr. Tanaka said in an interview on the sidelines of an Extractive Industries Transparency Initiative in Paris. But no country has asked the IEA to release their stockpiles.
• Consumer Outlook Index Falls, Hurt by Gas, Food Costs. Sticker shock at the gas pump and grocery aisle are taking a toll on consumer psyches in March. The Royal Bank of Canada‘s consumer outlook index fell to 42.5 this month from a reading of 44.5 in February. The index has fallen for three consecutive months. The RBC current conditions index fell to 32.4 this month from 34.4 in February, while the expectations index dropped to 53.6 from 56.8. “What really stands out to us is worry about the future,” says Tom Porcelli, chief U.S. economist at RBC. He said consumers are worried about their ability to save and invest. In a series of special questions, RBC asked consumers about the impact of higher gas prices on other spending decisions. A third of consumers, 32%, say they have already cut back on discretionary spending because of higher fuel costs. Another 36% said a price between $3.25 and $4 per gallon would force changes in shopping. Another 23% need prices to rise above $4 before cutting back elsewhere.
• China Autos in a Growth Shift. The world's biggest auto market is getting congested. Lured to China by a powerful trend—rising incomes mean rising demand for autos—auto makers now face a slowdown in growth. The government has phased out tax breaks that encouraged car buying in 2009 and 2010, financing purchases has become more difficult and Beijing has begun to restrict issuance of license plates.

CNBC.com:

• US Standard of Living in Peril From Dollar's Weakness: Zell. The US standard of living could drop 25 percent if the dollar loses its standing as the world's reserve currency, investor Sam Zell told CNBC.
• JPMorgan(JPM) Chase Made Nearly a Billion Dollars From Madoff.
• Most Retailers Top Estimates, Some See Weak March. The Thomson Reuters Same-Store Sales Index rose 4.2 percent in February, topping not only estimates, which called for an increase of 3.6 percent, but also growth in the year-ago period.

Business Insider:

• Obama Says Military Response IS an Option: Qaddafi Must Go.
• John Edwards Masterminded The Whole Rielle Hunter Cover-Up, Says Accomplice. Former presidential candidate John Edwards is still being investigated for using campaign funds to cover up his affair and love-child with Rielle Hunter.
• The 23 Governments That Could Get Crushed by Food Price Inflation.
  
• Libyan Rebels to Chavez: NO WAY.
• Sam Zell: Obamacare and Dodd-Frank Are Economy-Killling Monstrosities, And There Won't Be New Construction for Years.
• David Rosenberg: Business Insider is Right, Rates Will Move Down after QEII Ends.
  

Zero Hedge:

• On Charles Ponzi Day We Celebrate Another All Time Record in Food Stamp Usage. (graph)

NJ.com:

• Murray Hill-Based Bell Labs Develops 2-Inch Cube That Could Replace Unsightly Cell Towers. They tower over the landscape, sometimes disguised in a way that does not fool anyone. Big trees that look so fake, they are derided as "Frankenpines." Flagpoles that soar higher than any flag would warrant. Or unadorned towers that offer absolutely no pretense as to their purpose. But a day could soon come when those sky-high, unsightly cell phone towers that litter the countryside may be replaced with something no bigger than a Rubik’s cube. Called the lightRadio cube, the new device developed by Bell Labs in Murray Hill is generating major buzz by cell phone carriers around the world. "The lightRadio could radically transform the model for wireless networks and could actually change the way the wireless industry operates," predicted Dan Hays, a telecommunications consultant with PRTM in Washington, D.C.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -16 (see trends).

Politico:

• Report: Union Heads Make Six Figures. As the standoff between unions and Wisconsin Republicans wages on, an analysis of the nation’s 10 largest labor unions shows some top leaders — who are being derided as “union bosses” — make six-figure salaries funded by members’ dues. Leaders earned between $173,000 and $618,000 at major unions, the Center for Public Integrity found in examining 2009 tax records, with some groups paying dozens of employees in the six figures. At the three major unions , which together represent more than 5.6 million public workers, presidents’ salaries in 2009 ranged between $400,000 and $500,000.

Reuters:

• Shi'ites Stage Small Protest in Saudi Oil Province. Around 100 Saudi Shi'ites staged a protest in Saudi Arabia's oil-producing Eastern Province on Thursday, demanding the release of prisoners they say are being held without trial, witnesses said. Mostly young men marched through the small town of Awwamiya, near the Shi'ite centre of Qatif on the Gulf coast. "Peaceful, peaceful," the demonstrators shouted, holding up pictures of Shi'ites they say have been long held without trial, while policemen stood by without interfering.
• FACTBOX - Coming Events in Eurozone Debt Crisis.
  

Telegraph:

• Saudi Shiites Call for 'Day of Anger' in Kingdom. Saudi cyber activists have created a group on Facebook calling for a "Day of Anger" on Friday in the eastern Shiite-majority region following the arrest of a Shiite cleric. The group of more than 500 members is calling for protests after Friday prayers in Al-Hufuf, in Eastern Province's Al-Ihsaa governorate, to demand the release of Sheikh Tawfiq al-Amer. Mr Amer was arrested after calling for a "constitutional monarchy" in the Sunni-dominated kingdom, according to the Rasid website, which specialises in Shiite Saudi news. It said that Mr Amer has been held several times in the ultraconservative absolute monarchy over his calls "for giving Shiites further freedom to exercise their religious rights". The Shiites, who are mainly concentrated in the oil-rich Eastern Province, and make up about 10 per cent of the Saudi population as a whole, complain of marginalisation in the kingdom.
• America Must Escape the Doomed Path of EU-Style Decline. Since the Greek financial debacle last year, there has been a great deal of interest across the Atlantic in Europe’s debt crisis and the lessons that can be learned for America. Not least because the United States may face its own Greek-style economic meltdown in a few years time unless it gets its own house in order. Fortunately, there is a new wave of political leaders on Capitol Hill who are serious about cutting spending, reining in the deficit, and challenging the Big Government culture that has dominated Washington in recent years.

CTK:

• Only 15% of Czechs are in favor of adopting the euro, citing a poll by Medea Research.

Xinhua:

• The aging of China's population has quickened, citing the National Bureau of Statistics. About 12.5% of the total population consists of people 60 years or older. Since 2005, the proportion of people aged 14 years or younger has declined, while those over 14 has risen.

China Business News:

• Shenzhen will raise the minimum wage to 1,320 yuan a month, a 20% increase from 1,100 yuan, with effect from April 1, citing the city government.

Al Watan:

• Libyan authorities have detained a "large number" of Syrian workers on charges of "inciting revolution" in the North African nation.

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.95%)

Sector Outperformers:

• 1) HMOs +2.90% 2) Coal +2.65% 3) Disk Drives +2.45%

Stocks Rising on Unusual Volume:

• RY, ZUMZ, SKS, HEES, ACTG, CETV, NVMI, OVTI, SGI, ITMN, MDAS, HOLX, KNM, SHS, WTS, RY, MBT, SXI, MED, SKH, CVH, WNR, CVI, TTI, VLO, CALX, TDC, PLT, LNC, RCL, NLC, RLD and TUP
  

Stocks With Unusual Call Option Activity:

• 1) AMLN 2) RSX 3) CAG 4) TJX 5) QLD
  

Stocks With Most Positive News Mentions:

• 1) GGP 2) WTS 3) VPRT 4) CRDN 5) UNH

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Oil Rises for Third Day on Mideast Unrest Concern, U.S. Stockpile Decline. Oil climbed for a third day as a U.S. government report showed crude stockpiles unexpectedly dropped last week while fighting in Libya renewed concern that supply disruptions may spread to the Middle East. Futures gained as much as 0.7 percent, rising from the highest close in 29 months, after Libyan forces loyal to Muammar Qaddafi attacked rebels on the east coast where much of the country’s oil is refined and shipped. Nouriel Roubini said an escalation of unrest in the Middle East may push prices as high as $140 to $150 per barrel. U.S. crude inventories dropped for the first time in seven weeks, a report showed yesterday. “The big risk at the moment does remain around the Middle East, in particular Iran,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. Crude for April delivery gained as much as 71 cents to $102.94 in electronic trading on the New York Mercantile Exchange, and was at $102.49 at 12:42 p.m. Sydney time. Yesterday, the contract rose $2.60 to $102.23, the highest settlement since Sept. 26, 2008. Prices are up 27 percent from a year ago. Brent crude for April settlement increased 26 cents, or 0.2 percent, to $116.61 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it rose 93 cents, or 0.8 percent, to $116.35, the highest since Aug. 21, 2008. Websites have called for a nationwide Saudi “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
• Food Prices to Extend Gains as Stockpiles Rebuilt, Led by Corn, UBS Says. Food prices will extend gains even as harvests expand, as exporters need to rebuild stockpiles, tightening global supplies and driving corn, wheat and soybeans higher, UBS AG said. Corn may advance to $8.30 a bushel, 15 percent higher than yesterday’s close, Dominic Schnider, director for wealth management research at UBS, said in an interview in Singapore yesterday. Wheat may jump 23 percent to $10 a bushel, while soybeans may surge 7.6 percent to $15 a bushel, he said. “We need to have at least two or three years of good harvests” to rebuild stockpiles, Schnider said. The global food price index, compiled by the United Nations’ Food and Agriculture Organization, surged to a record for a second month in January, driven by higher prices of cereals, dairy and sugar. Extending those gains may push millions more people into extreme hunger and poverty, prompting governments to pay more for food subsidies, widening national budget deficits. Food prices are already at “dangerous levels” after pushing 44 million people into poverty since June, World Bank President Robert Zoellick said Feb. 15. That adds to the more than 900 million people around the world who go hungry each day, he said.
• China Signals Potential Opposition to No-Fly Zone Over Libya. China joined Russia today in signaling potential opposition to imposing a no-fly zone over Libya if fighting continues between protesters and forces loyal to leader Muammar Qaddafi.
• Brazil Increases Key Rate to 11.75% as Inflation Threatens Bank's Target. Brazil’s central bank raised its benchmark overnight rate by a half-point for a second straight meeting to cool inflation that is approaching the upper limit of the government’s target range. The bank’s policy committee, led by President Alexandre Tombini, today voted unanimously, without a bias, to raise the Selic rate 50 basis points, or 0.5 percentage point, to 11.75 percent, matching the estimates of 44 of 51 analysts surveyed by Bloomberg. Six economists forecast a 0.75-point increase and one predicted a full percentage-point increase. “Following the process of adjustment of monetary conditions, the monetary policy committee decided, unanimously, to raise the rate to 11.75 percent a year, without a bias,” policy makers said in the statement announcing their decision. Annual inflation in the $1.57 trillion economy has accelerated every month since August, prompting the bank to raise interest rates in January for the first time since July. “There is a slowdown happening, and that helps the central bank,” said Marcelo Salomon, chief Brazil economist for Barclays Capital. “It clearly gives the bank more time to work around the necessary adjustment cycle.” Brazil’s economy expanded in December at its slowest pace in six months, after retail sales stalled and credit growth slowed, according to the central bank’s economic activity index, a proxy for gross domestic product. Inflation, as measured by the benchmark IPCA-15 index, accelerated to 6.08 percent in the year through mid-February, the fastest pace since December 2008. In the month through mid-February, prices rose 0.97 percent, the highest since April 2003. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.

Wall Street Journal:

• West Cools on No-Fly Zone. Senior U.S. defense officials tried to lower expectations of an international military intervention in Libya, as rebels, fighting off a key offensive by forces loyal to Col. Moammar Gadhafi, called for foreign airstrikes.
• Ohio Vote Puts Curbs on Unions in Reach. Ohio state senators narrowly approved a bill that would prohibit public-employee unions representing 400,000 state and local workers from bargaining over health benefits and pensions, while also eliminating the right to strike. While national attention has focused for weeks on a similar battle in Wisconsin, the vote, by 17-16 in Ohio's Republican-controlled Senate, virtually ensured that the Buckeye State will become the first to strip collective-bargaining rights from public employees as states grapple with recent gaping budget deficits. The move is especially significant because Ohio is larger than Wisconsin, and like its fellow Midwestern state, is both a stronghold of public-sector labor unions and a swing state politically.
• SEC Probe Examines Bank-Loan Practices. The Securities and Exchange Commission is scrutinizing U.S. banks that have restructured troubled loans in order to make them appear healthier than they really are, according to people familiar with the situation. Officials at the SEC are seeking information from an unknown number of regional and community banks with large concentrations of commercial real-estate loans, these people said.
• Bill Gates Says High Pension Costs Hurt Education. Billionaire philanthropist Bill Gates will step into the national debate over state budgets Thursday with a call for states to rethink their health care and pension systems, which he says stifle funding for public schools. Mr. Gates in an interview said he will use a high-profile conference Thursday in Long Beach, Calif., to urge that more attention be paid to how states calculate their employee-pension funding and health-care obligations. "These budgets are way out of whack," Mr. Gates said. "They've used accounting gimmicks and lot things that are truly extreme." The comments come after Mr. Gates spent more than a year studying the issue and enlisting the advice of leading academics and others.
• Mets Owners Threatened With More Charges. The owners of the New York Mets, who face a $1 billion lawsuit related to withdrawals they made from Bernard Madoff's investment firm, are expected to face additional allegations from a court-appointed trustee about how they may have benefitted from the multibillion-dollar Ponzi scheme if they fail to reach a settlement, according to a person familiar with the situation.
• Heads of U.S., Mexico to Meet as Tensions Rise. President Felipe Calderón will meet in Washington on Thursday with President Barack Obama in an attempt to repair relations at a time when spiraling violence in Mexico's drug war has frayed ties between the two allies.
• Fed Finds Climbing Costs Hit Shoppers. Many manufacturers are passing along higher input costs to their customers, a sign that rising prices for wheat, cotton, iron, and other commodities could increasingly reach consumers in coming months, according to the Federal Reserve's beige book survey. The report, a summary of economic conditions across the central bank's 12 regional districts, said manufacturers "in a number of districts reported having greater ability" to pass through higher costs. "Retailers in some districts mentioned they had implemented price increases or were anticipating such action in the next few months," the Fed said.
• U.S. Troops Shot in Germany; Terror Suspected. A lone gunman killed two American servicemen and wounded at least two others on a U.S. military bus outside Frankfurt Airport in what officials described as a possible terrorist attack. The shooting was the first deadly assault on U.S. military personnel in Europe in years. The official said it was too early to tell if the suspect was aligned with Al Qaeda or localized Islamic organizations in Kosovo, a former Yugoslav territory that is majority Muslim.
• Message to the GOP: Austerity Is Not Enough. Republicans won't capture the White House without a pro-growth platform.
• Obama's Health Waiver Gambit. The White House offers the mirage of state flexibility.
• Time to Get Serious About American Oil. Why is Washington blocking oil exploration in states like Alaska and Louisiana when the Middle East is such a powder keg?

CNBC:

• Democrats Ready Spending Bill With Few Cuts: Aide. U.S. Senate Democrats are preparing a spending bill that yields no ground to House Republicans who are seeking deep cuts in government spending, a Democratic aide said on Wednesday.The spending bill would essentially keep government spending at its current level through the end of the fiscal year on Sept. 30.

MarketWatch:

• Walt Mossberg Talks Apple(AAPL) iPad 2. (video)

Business Insider:

• An Orgy of Speculation. Ben Bernanke is confident that his policies have paved the way for a self sustaining recovery, but there's plenty of reason to be skeptical. For one thing, the Fed's zero rates and bond buying program (QE2) have had a negligible effect on unemployment and housing. And for another, they've led to a surge in speculation. That's hardly a reason to celebrate. In the last week, a number of reports confirm that hedge funds have been loading up on debt believing that improving economic data and the Fed's liquidity support will push stocks even higher. That seems like a risky bet given the unevenness of the rebound and the spreading mayhem in the Middle East. Even so, fund managers are levering-up like there's no tomorrow convinced that this is the beginning of another bull market. Here's the rundown from Bloomberg:
• Wall Street to Trade Municipal Bonds Like It Trades Mortgages. The major players in muni CDSX will be hedge funds, Lo says. "There's a lot of money sloshing round hedge funds. I wouldn't be surprised if John Paulson [who shorted residential mortgage backed security CDOs with credit default swaps and made a fortune] put a large chunk of his very large fund into a bet against the muni bond market using these CDS instruments." We know the signs this time. It remains to be seen if they will they be ignored.
• At Least Five Legal Complaints Brought Against Ray Dalio's "Demoralizing" Management Style.
• Here's That Pentagon "Financial Terrorism" Report Glenn Beck and Maria Bartiromo Are Talking About.
• Murder in Pakistan: A Chilling Message. Shahbaz Bhatti, Pakistan's federal minister for minorities, was assassinated today by Islamic extremists determined to bring down Pakistan's civilian government.
• Clinton's Biggest Fear: Al Qaeda Rising in Libya. US Secretary of State Hillary Clinton appeared before the Senate Foreign Relations Committee today and revealed her greatest fear about the events unfolding in Libya. ABC News reports:
  

Zero Hedge:

• Complete List of Which Countries Sold Weapons to Libya.
• Watch the Highlight of Today's Congressional Hearing: Ron Paul vs. The Bernank. (video)
• US Naval Update: It's a Mediterranean Party and The Enterprise is Invited - Libyan Endgame Expected Within 5-7 Days.
  

IBD:

• Chipotle(CMG) to Up Overseas Presence, Test Asian Eatery.

Forbes:

• China's High-Speed Rail, Highly Suspect. It may be another symptom of a bubble economy in which vast sums are misspent on underutilized assets. (Hmmm…like in the financial whirl of America’s “cowboy capitalism”!) “The costs are raising worries over financing,” the SCMP reports. “Major state-owned railway and rail car building companies with shares listed in Hong Kong and Shanghai [see China Railway Construction Corp., China Railway Engineering Corp. and subsidiaries ] are relying on bonds and bank loans to finance projects, with onerous repayment obligations that may be difficult to meet given the revenue projections for many projects.” It all stems from the state and the railways ministry has amassed $300 billion in debt.

CNN Money:

• The Big Deal About the NYSE's(NYX) Big Deal: Derivatives. As regulators start to scrutinize the proposed combination of the NYSE and the Deutsche Börse, they'll need to take into account much more than just equity trading.
• Libya: Spending Oil Money Across the Globe. In the span of a few years, Libya's financial tendrils have reached across oceans, across borders and across continents.

Washington Post:

• Bradley Manning, WikiLeaks' Alleged Source, Faces 22 New Charges. The Army has brought new charges - including one that carries the death penalty - against Pfc. Bradley E. Manning, a former intelligence analyst accused of leaking hundreds of thousands of classified military and diplomatic documents to the anti-secrecy Web site WikiLeaks.

All About Alpha:

• Hedge Funds and "Stock Manipulation": Perpetrators, Accomplices or Just in the Wrong Place at the Wrong Time (again)? (graphs)
  

Chicago Tribune:

• Missing Wisconsin Dems Now Face $100 Daily Fines. The 14 Wisconsin state Senate Democrats who left the state two weeks ago now face fines of $100 for each day they stay away.

Politico:

• GAO: Medicare Losing $48 Billion. Nearly 10 percent of all Medicare payments are fraudulent or otherwise improper, and the government isn’t doing enough to stop them. That’s the conclusion of a Government Accountability Office report released Wednesday. The report, issued at the request of a House subcommittee investigating Medicare and Medicaid fraud, estimates that the federal government is losing $48 billion on the improper payments – a significant amount for a program that “is fiscally unsustainable in the long term” unless action is taken.
  

Reuters:

• China's annualized inflation for the first quarter of the year will likely exceed 5%, citing Fan Jianping, head of economic forecasting at the State Information Center.
• Monster U.S. Online Jobs Index Rises in February. A monthly gauge of online labor demand in the United States rose 4 percent in February compared with the same month a year ago, led by gains in the utilities and retail sectors, according to data released on Thursday. Compared with January, Monster Worldwide Inc(MWW), an online recruiting firm, said its monthly index rose by 6 percent in February.
• QE-2 May Be Peak for Profits by US Primary Dealers. The securities firms waiting to join the ranks of the U.S. primary dealers may be in a race against the clock -- the QE-2 clock. Several firms are waiting for approval from the Federal Reserve Bank of New York to become primary dealers, designated banks and securities dealers responsible for dealing directly with the New York Fed and the Treasury Department. The sooner they get approved, the sooner they'll get a cut of the Fed's quantitative easing business, set to end in June.

Telegraph:

• SEC Eyes Hedge Fund Bonus Curbs. The US financial regulator has proposed a clampdown on hedge fund bonuses deemed to encourage dangerous risk-taking. The Securities and Exchange Commission (SEC) voted yesterday for a proposal that would force brokers and investment advisers, including hedge funds, with more than $1bn (£610m) in assets to reveal staff bonus arrangements annually. The regulator could then ban bonuses if they were judged to cause excessive risk-taking. The proposal by the SEC, which failed to win the backing of the regulator’s two Republican commissioners, follows a similar proposal made last month for banks by the Federal Deposit Insurance Corporation (FDIC), a fellow regulator.
• Saudi Arabia Contagion Triggers Gulf Rout. Fears of sectarian uprisings in Bahrain and Saudi Arabia have set off the first serious wave of investor flight from the Gulf, compounding market turmoil as civil war in Libya pushes Brent crude over $116 a barrel. Saudi Arabia’s Tadawul stock index has tumbled 11pc in wild trading over the past two days, led by banks and insurers. Dubai’s bourse has hit a 7-year low. The latest sell-off was triggered by the arrest of a Shi’ite cleric in the Kingdom’s Eastern Province after he called for democratic reforms and a constitutional monarchy. The province is home to Saudi Arabia’s aggrieved Shi’ite minority and also holds the country’s vast Ghawar oilfield, placing it at the epicentre of global crude supply. “Unrest in this region can have fatal consequences for the world,” said JBC Energy. “The plunge on the Saudi stock exchange can be interpreted as a sign of waning trust.”

Spiegel Online:

• The gunman who killed two U.S. airmen at Frankfurt Airport was specifically targeting American military personnel, citing officials familiar with the matter. Investigators haven't determined whether the attacker, identified as a citizen of Kosovo, was acting alone or as part of an organized group.

The Australian:

• US Obsessed With Doing Nothing About Debt Says Hedge Fund Guru Julian Robertson. THE US Federal Reserve's policy of printing money -- quantitative easing -- is pushing up commodity prices sharply, according to the world's best known hedge fund manager, Julian Robertson. Speaking in Sydney yesterday, the US-based founder of the legendary Tiger Fund said quantitative easing was encouraging reckless spending and sending investors to non-cash assets as they sought a safe place for their investments. "Not just gold and silver but cotton, soybeans, you name it, they're all rising," he said, noting that the US dollar was now no longer the safe haven it was. "It's not my refuge," he said emphatically. He said the US approach to rectifying its financial problems was making it look as though "things will go along OK" when they would not, in the long run. "We are obsessed with not doing anything about it," he said, referring to the debt burden and the giant budget deficit left over from the global financial crisis. Looking at the US economy, Mr Robertson said: "We are broke, broker than all get out. "We prefer to put on the Santa Claus suit and celebrate Christmas" rather than address underlying problems in the US economy such as the budget deficit. China was "a fascinating place and a new market", but far from a simple boom story. "There are more price dislocations, both ways, in stocks there, than almost anywhere else," he said. But he is not convinced overseas demand will fuel growth in China forever. "Demand out of China is going to depend on whether other economies around take up the supply of goods that China produces," he said. Alex Robertson said that there was a serious demographic problem from the effects of the one-child policy: "Men will outnumber women, and that could impede the economy."

China Securities Journal:

• China is moving away from the double-digit growth era in the next five years because of the threat of inflation and environmental problems. China can no longer sustain high investment, high consumption and low benefit growth, the commentary said.
• China's central bank will raise the reserve requirement ratio "shortly" to ease liquidity pressure, citing analysts.
  

Financial News:

• China should levy a property tax in regions with surging real estate prices, citing Yan Qingmin, an assistant chairman of the China Banking Regulatory Commission. The banking regulator will enhance efforts to prevent risks stemming from property loans, citing Yan. The effects of lending policies in property curbs should not be exaggerated, citing Yan.
• China's consumer prices may rise about 4% in February, citing Wang Xiaoguang, a researcher with the Chinese Academy of Governance. The country is facing strong inflation expectations, citing Pan Jiancheng, deputy director-general of the China Economic Monitoring and Analysis Center of the National Bureau of Statistics.
  

China Daily:

• Only 6% of Chinese People See Themselves as Happy, citing a survey of about 1,350 people carried out by government information portal china.com.cn. Almost 40% of those surveyed believe that happiness is determined by how wealthy a person is, and people living in first-tier cities are the least content due to pressure from the high prices of housing and traffic congestion, citing the results of the poll. Zhang Jing, a 25-year-old procurement agent at a Shanghai-based foreign-invested company, described her life as "unexciting" to China Daily, saying entertainment was rare. "More than one-third of my salary goes on the rent and the rest has to cover transportation and food. In the end, my disposable income is almost nothing," she said. Zhang Lifan, a well-known expert on China's modern history, noted that it is imperative that the government redistributes the fruits of economic development so more people benefit because the widening wealth gap is "tearing society apart". According to a World Bank report, the Gini coefficient for China is now close to 0.5, which points to an unequal distribution of income that could lead to social unrest. On the Gini coefficient, 0.4 is considered as the threshold of serious inequality.

Evening Recommendations
Citigroup:

• Reiterated Sell on (IR), target $41.

Night Trading

• Asian equity indices are -.50% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 109.50 -.5 basis point.
  
• Asia Pacific Sovereign CDS Index 120.0 +.75 basis point.
  
• S&P 500 futures +.45%.
  
• NASDAQ 100 futures +.37%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (COO)/.67
• (BIG)/1.38
• (HNZ)/.82
• (KR)/.44
• (GCO)/1.29
• (NOVL)/.06
• (DLM)/.40

Economic Releases
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 395K versus 391K the prior week.
• Continuing Claims are estimated to rise to 3815K versus 3790K prior.
• Final 4Q Non-Farm Productivity is estimated to rise +2.3% versus a prior estimate of a +2.6% gain.
• Final 4Q Unit Labor Costs are estimated to fall by -.5% versus a prior estimate of a -.6% decline.
  

10:00 am EST

• ISM Non-Manufacturing for February is estimated to fall to 59.3 versus 59.4 in January.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Kocherlakota speaking, Fed's Lockhart speaking, ICSC Feb. Chain Store Sales, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, RBC Capital Restaurant/Leisure Investor Day, (A) analyst meeting, (ANSS) investor day, (SWK) analyst day, (JNPR) analyst meeting and the (MXIM) analyst day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.