North American Investment Grade CDS Index 83.49 +.87%
European Financial Sector CDS Index 111.17 +1.61%
Western Europe Sovereign Debt CDS Index 173.17 bps +.19%
Emerging Market CDS Index 213.98 +.41%
2-Year Swap Spread 21.0 +1 bp
TED Spread 20.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .11% -1 bp
Yield Curve 281.0 +2 bps
China Import Iron Ore Spot $176.60/Metric Tonne -.73%
Citi US Economic Surprise Index +97.50 +11.4 points
10-Year TIPS Spread 2.49% -1 bp
Overseas Futures:
Nikkei Futures: Indicating -88 open in Japan
DAX Futures: Indicating -15 open in Germany
Portfolio:
Slightly Lower: On losses in my Retail and Medical longs
Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades near session lows, despite yesterday's strong showing, a positive jobs report, gains in Asia overnight and lower long-term rates. On the positive side, Networking and Oil Tanker shares are higher on the day. Small-caps are outperforming again. "Growth" stocks are strongly outperforming "value" shares. The 10-year yield is falling -8 bps to 3.47%. The Israeli sovereign cds is falling -3.45% to 157.37 bps and the US sovereign cds is declining -3.77% to 43.5 bps. The UBS-Bloomberg Ag Spot Index is down -.54%. Lumber is gaining +2.86%. On the negative side, I-Banking, Bank, Airline, Education, Homebuilding, Oil Service and Defense shares are under significant pressure, falling more than 2.0% on the day. Cyclicals are underperforming. (XLF) has been heavy throughout the day. The Portugal sovereign cds is rising another +3.2% to 483.83 bps and the Greece sovereign cds is gaining another +2.05% to 986.95 bps. The avg. US price for a gallon of gas is up another .04/gallon today to $3.47/gallon. It is now up .35/gallon in 17 days. The US dollar continues to trade very poorly. Oil is surging another +3.0% and gold is rising 1.06%. Investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Oil will likely continue to grind higher until the situation in Saudi calms. It is hard to see this happening before next Friday's "day of rage". Stocks will likely remain hostage to oil for quite some time. Any unexpected meaningful reversal lower in oil in the short-term would likely send stocks to new 52-week highs. I expect US stocks to trade mixed-to-lower into the close from current levels on rising energy prices, growing Mideast unrest, emerging market inflation fears, profit-taking, more shorting and technical selling.
Qaddafi's Opponents Hold Eastern Oil Facilities, Advance Along Libya Coast. Libyan rebels seeking to end Muammar Qaddafi’s 41-year rule clashed with security forces loyal to him and moved closer to his birthplace of Sirte after repelling government attempts to retake oil hubs in the east. The conflict has left 6,000 people dead, the opposition forces’ spokesman, Abdullah Al Mahdi, told Al Jazeera today. Fighting spread along the Gulf of Sidra, with clashes in the oil port of Ras Lanuf and the desert area of Al Agaila, the broadcaster said. The rebels said they downed a military helicopter and were advancing on Sirte, on the west-central coast, Al Arabiya television said. The oil facility at Zueitina, near Benghazi, was ablaze, the U.K.’s Daily Mail said.
Bahrain May Be Uprising Too Far for Saudis Avoiding Iran's Grip. Saudi Arabia has watched revolts unfold in Tunisia, Egypt and Libya. When it comes to Bahrain, the world’s largest oil exporter may not be a mere spectator. Protests on the neighboring island, where the U.S. Navy’s Fifth Fleet guards Gulf oil supply, are being overshadowed by the challenge to Libya’s Muammar Qaddafi. Yet they underscore the sectarian divide in the Muslim world between Shiites and Sunnis that puts Iran on one side and Saudi Arabia on the other in a region that holds about 55 percent of the world’s crude. “Saudi Arabia is concerned about the expansion of the Shiite crescent,” said Theodore Karasik, director of research at the Dubai-based Institute for Near East and Gulf Military Analysis. “The last thing Riyadh would want to see is Shiite rule in Bahrain. At the end of the day, Saudi Arabia would intervene militarily.”
Crude Oil Advances to a 29-Month High as Libya Unrest Threatens to Spread. Crude in New York increased to a 29- month high on concern unrest in Libya will spread to other North African and Middle East energy exporters, curbing shipments. Oil rose as much as 2.1 percent as Libyan leader Muammar Qaddafi sent troops to recapture towns in the western part of the country and prepared to quash protests in the capital, Tripoli. Crude oil for April delivery increased $1.69, or 1.7 percent, to $103.60 a barrel at 11:26 a.m. on the New York Mercantile Exchange. Prices climbed as much as $2.18 to $104.09, the highest level since Sept. 29, 2008. The contract is heading for a 5.8 percent gain this week, the third straight advance, and is up 29 percent from a year ago. Brent crude for April settlement rose $1.25, or 1.1 percent, to $116.04 a barrel on the London-based ICE Futures Europe exchange. The contract is up 3.5 percent this week and is heading for the sixth straight weekly gain. “Everyone in the market is very concerned about the situation in the Middle East,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The Day of Rage protest called for next week in Saudi Arabia will keep us on edge.”
U.S. Payrolls Rose 192,000; Jobless Rate at 8.9% in February. The U.S. jobless rate unexpectedly fell to 8.9 percent, the lowest in almost two years, and employers added 192,000 jobs in a sign of growing confidence in the recovery. The increase in payrolls partly reflected a return to more seasonable weather and followed a 63,000 gain in January, Labor Department figures showed today in Washington. The median estimate in a Bloomberg News survey of economists was for an addition of 196,000 jobs last month. Earnings averaged $22.87 an hour last month, little changed after a 0.4 percent jump in January. The average work week for all workers held at 34.2 hours. The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 15.9 percent, the lowest since April 2009.
Record Gasoline Grips Europe While California Faces $4 a Gallon. Gasoline prices are setting records across Europe and exceeding $4 a gallon in California as the rise in crude oil caused by the conflict in Libya punishes companies and consumers. Households are cutting back on travel, cinema visits and groceries in the U.K., where prices jumped to 130.68 pence a liter ($8.06 a gallon) yesterday, according to research from the Automobile Association, Britain’s largest motoring organization. Prices set records in the Netherlands and Italy today. The current average U.S. gasoline price is near a two-year high at $3.81 a gallon, according to the AAA website. Crude oil’s rise to as high as $119 in Europe has pushed fuel costs up and put the economic recovery at risk.
Cotton Futures Soar to Record on 'Worldwide Scramble' for Limited Supplies. It’s a worldwide scramble,” said John Flanagan, the president of Flanagan Trading Corp. in Fuquay-Varina, North Carolina. “The last holdouts realized there was no way out other than just buying, trying to find cotton to keep their mills running.” Cotton for May delivery climbed by the exchange maximum of 7 cents, or 3.4 percent, to an all-time high of $2.127 a pound at 9:18 a.m. on ICE Futures U.S. in New York. The price headed for the sixth straight gain, the longest rally since Nov. 5. This week, futures are up 15 percent, the most since early December.
U.S. Retailer Shares' Slide Since Black Friday Signals Squeeze on Margins. The era of cheap jeans may be ending as U.S. apparel retailers take advantage of the economic recovery to boost prices on some products for the first time in more than a decade. The increases may contribute to a slowing in consumer spending, while not fully offsetting record cotton costs, higher wages in China and rising freight charges that are squeezing margins.
Rising Commodity Prices Spur Governments, Companies to Insulate Themselves. The agricultural price rally of 2008 unleashed riots in more than 30 countries and forced companies into bankruptcy. It lasted five months. The latest rise in commodity prices, which has already helped topple regimes in Tunisia and Egypt, may last many more months, if not years. “If you are not scared, you are not paying attention,” says David Nelson, a global strategist in the food and agribusiness research advisory unit of Rabobank in Chicago. “There is no margin for error with these agricultural markets.” That prospect has governments and companies around the world searching for ways to profit or insulate themselves from price shocks, Bloomberg Businessweek reports in its March 7 issue. A growing, more prosperous global population is draining stores of grain and meat. Global inventories of corn -- used in food, feed and fuel -- will fall to just 53 days, a 37-year low, before harvests in the northern hemisphere begin, according to U.S. Department of Agriculture data. Soybean stockpiles worldwide as a percent of demand may be the lowest in almost 18 years, Paris-based Societe Generale forecast last month.
Fed Policy Makers Signal Abrupt End to Bond Purchases in June. Federal Reserve policy makers are signaling they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets. “I don’t see a lot of gain to reverting to a tapering approach,” Atlanta Fed President Dennis Lockhart told reporters yesterday. “I don’t think that is necessary,” Philadelphia Fed President Charles Plosser said last month.
Bearish Bets on Soybeans, Cattle Surge to Two-Year High in Options Market. Investors are making the most bearish bets against crops and livestock in the U.S. equity- options market since 2008 after the World Bank said prices surged to dangerous levels. The number of outstanding puts to sell the PowerShares DB Agriculture Fund, which tracks 11 commodities from corn to soybeans and cattle, versus calls to buy has increased to 0.67 and reached a 28-month high of 0.69 on Feb. 28. The ratio doubled in January and February, the fastest two-month rate since February 2008, according to data compiled by Bloomberg. The $4 billion exchange-traded fund had its first outflows of the year in the week ended Feb. 23, with investors removing a net $116.4 million, EPFR Global data show.
Wall Street Journal:
Gadhafi's Tight Grip on Tripoli Suppresses Protests.Libya's security forces displayed a tight grip on the capital after the city's Friday prayers, succeeding in largely suppressing antigovernment protests while supporters of the leader, Col. Moammar Gadhafi, staged noisy and widespread rallies throughout the city. Amid a tense mood in the sprawling capital, several hundreds residents of the industrial suburb Tajura were one of the only parts of the city to take to the streets to denounce the 42-year rule of Col. Gadhafi and demand that he step down. The demonstration took place despite what residents said were a wave of arrests in the area earlier in the week and their growing fear of reprisals for voicing opposition publicly.
Unions Contend With Inhospitable States. Efforts to strip public employees of collective-bargaining and other rights in Wisconsin and Ohio have received much of the attention, but at least 10 other states are pursuing similar measures.
Yemeni Protests Turn Violent. Yemeni soldiers fired rockets on protesters in the restive northern province of Amran Friday, killing three people and injuring seven others, according to a Shia rebel spokesperson. "We were staging a peaceful protest along a main road when soldiers fired rockets on us," said Abu Hashim, a spokesman for the group. Mr. Hashim said there were "thousands of people" at the protest and the dead included a 70-year-old man. Eyewitnesses said tanks were used and eight people had been killed.
Bloomberg Businessweek:
Fitch Cuts Spain Outlook to Negative on Bank Costs, EU Deal.Spain had the outlook on its debt rating cut to “negative” by Fitch Ratings, which cited the potential cost of rescuing its savings banks and risks to the economic recovery. Fitch, which has Spain at AA+, lowered the rating from “stable,” it said in a statement today. It also noted the “potential for an intensification of volatility and stress in European financial markets” if governments don’t agree on a “credible and comprehensive response” to the debt crisis at summits this month. The European Union is facing an end-of-the-month deadline for a reinforced plan to aid debt-strapped countries after bailing out Greece and Ireland last year.
MarketWatch:
Marvell(MRVL) Miss Highlights BlackBerry Woes.Marvell Technology’s disappointing earnings report not only sent its own shares tumbling on Friday, it also turned the spotlight on the BlackBerry’s struggle to compete with the iPhone and Android-based devices.
CNBC.com:
US Airlines Raising Fares Again Amid Rising Fuel Costs. Airfares at major U.S. airlines are climbing again, continuing a dizzying pace of nearly weekly increases on both penny-pinching vacationers and expense-account corporate fliers.
Business Insider:
TEACHING YOUR KIDS THESE DAYS: Live Sex In Class.We thought you'd like to stay apprised of what $40,000-a-year in private-college tuition buys you these days. The Daily Beast reports: It was bizarre, say students—even for a professor who gets off (excuse the pun) on controversy. On Feb. 21, after a lecture on sexual arousal, students in Northwestern Universitypsychology Professor J. Michael Bailey’s human-sexuality course were given the option to stay for a guest presentation. Most were used to these sessions: With topics like “The Gay Guys Panel” (gay men talking about their sex lives) and Q&A sessions with transgender performers, the optional add-ons were part of what made Bailey’s class one of the most popular on campus. But this particular lecture was, shall we say, different. Led by a man whose website describes him as a “psychic detective and ghost hunter,” it was called “Networking for Kinky People,” and began with a towel placed neatly on the auditorium stage. Next, a woman took her clothes off, and—with an audience of around 100—lay down on her back, legs spread. As students moved forward from the theater’s back seats, for a closer view, “The girl grabbed the mic,” says Sean Lavery, a Northwestern freshman. “She explained that she had a fetish for being watched by large crowds while having an orgasm.”
Economists: State, Local Pension Funds Understate Shortfall by $1.5 Trillion or More. The pension funds for state and local workers in the United States are understating the amount they will owe workers by $1.5 trillion or more, according to some economists who have studied the issue, meaning that the benefits are much costlier than many governments and taxpayers thought.
Boston Globe:
Local Consultants Aided Khadafy. It reads like Libyan government propaganda, extolling the importance of Moammar Khadafy, his theories on democracy, and his “core ideas on individual freedom.’’ But the 22-page proposal for a book on Khadafy was written by Monitor Group, a Cambridge-based consultant firm founded by Harvard professors. The management consulting firm received $250,000 a month from the Libyan government from 2006 to 2008 for a wide range of services, including writing the book proposal, bringing prominent academics to Libya to meet Khadafy “to enhance international appreciation of Libya’’ and trying to generate positive news coverage of the country.
Daily Herald:
Illinois' Long-Term Pension Debt Jumps Sharply. The financial hole in Illinois' government pension systems grew even larger last year, the state auditor reported Thursday — a problem that tends to increase pressure on a state budget already stretched too far. The long-term gap between what Illinois owes future retirees and the money available to pay them jumped 21 percent under a new measuring system, Auditor General William Holland reported.
Watchdog Probing if SEC Lawyer Had Madoff Conflicts.The top watchdog at the U.S. Securities and Exchange Commission has launched an investigation into whether the agency's senior lawyer should have been allowed to handle Bernard Madoff matters even though his deceased mother had invested with the convicted swindler. The suit does not accuse them of knowing about Madoff's Ponzi scheme, but it seeks $1.5 million in alleged phony profits their mother's estate received through Madoff investments. Becker is a co-executor of his mother's estate.
Weekly Leading Economic Growth Gauge Eases in Latest Week: ECRI. A measure of future economic growth dipped in the latest week, while its annualized growth rate racked up a fresh nine-month high, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell back to 129.8 in the week ended February 25 from 130.5 the previous week. The index's annualized growth rate rose to 6.5 percent from 6.1 percent a week earlier. That was the highest since the week ended May 14, 2010 when it stood at 9.4 percent.
European Central Bank Wants to Unload PIIGS Bonds. During the crisis, the European Central Bank began buying up bonds from debt-ridden countries like Greece. Now the bank wants to transfer responsibility for those securities to the EU's euro rescue fund. Meanwhile, the parliamentary group of German Chancellor Angela Merkel's conservatives have issued a resolution opposing such bond purchases.
Vietnam News:
First Solar Inc.(FSLR) has been given permission by the Ho Chi Minh City People's Committee to build a solar panel factory. The plant will be built in the Dong Nam Industrial Zone in Ho Chi Minh City's Cu Chi District with a total investment of $1.2 billion.
Xinhua:
China's eastern province of Zhejiang, a manufacturing center, will increase its minimum wage as much as 19%, effective next month, citing a government statement. The province, where 20 million rural migrant workers are employed, will seek "markedly higher" increases in minimum pay in the five years through 2015.
Leaders of China's official Protestant and Catholic churches asked members to stay away from public street protests called for every Sunday. A group of Chinese Christians allegedly called for regular Sunday-afternoon gatherings in 38 public places, citing foreign media.
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.”
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
