Oil Falls for a Second Day in New York as OPEC Discusses Emergency Meeting. Oil dropped for a second day as members of the Organization of Petroleum Exporting Countries considered talks about increasing production as fighting disrupts supplies from Libya. Futures dropped as much as 0.6 percent after Kuwait’s oil minister said OPEC members are weighing an “urgent” meeting to determine whether more output is needed, as Libyan rebel fighters prepared an offensive to regain a town lost to Muammar Qaddafi’s forces. U.S. crude supplies rose the most since November last week, the American Petroleum Institute said. Crude for April delivery decreased as much as 66 cents to $104.36 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.42 at 1:07 p.m. Sydney time. Yesterday, the contract lost 42 cents from the previous settlement of $105.44, the highest since Sept. 26, 2008. Prices are up 28 percent from a year ago.
Portugal Must Boost Investor Trust as Yields Rise, Ambassador to U.S. Says.Portugal must shore up investor confidence by meeting deficit-reduction targets and spurring economic growth, Nuno Brito, the country’s ambassador to the U.S., said as the nation prepares to sell 1 billion euros ($1.39 billion) in debt with yields hovering close to record highs. “One of our main tasks is to rebuild trust,” Brito, who assumed his post last month, said in an interview at Bloomberg News headquarters in New York yesterday. “We have no option but to be overambitious.” Portugal’s 10-year bond yield reached 7.636 percent on Feb. 10, the highest since at least 1997, according to data compiled by Bloomberg, as concern mounted the nation will need to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund. Portugal’s sale of up to 1 billion euros of September 2013 notes today will be its second debt auction this year.
China Says Property Demand Driven by 'Unreasonable' Speculation. China’s rising property marketin the past few years was driven in part by “unreasonable” demand from speculators, according to Qi Ji, Vice Minister of Housing and Urban-Rural Development. “The government’s property curbs are targeted principally at those who don’t have an immediate need for housing as accommodation,” Qi said in a press briefing in Beijing today. “Our basic aim is to direct the limited supply of housing to those who need it the most.”
BofA(BAC) is 'Very Active Seller' Of Commercial Real Estate, Risk Chief Says. Bank of America Corp. (BAC), the biggest U.S. lender, is a “very active seller” of commercial real estate as the firm seeks to limit losses on assets accumulated through acquisitions, Chief Risk Officer Bruce Thompson said. Commercial real estate loans in the core portfolio fell 28 percent in 2010 to $48 billion at the end of the year, the Charlotte, North Carolina-based lender said in a presentation on its website today. The decline is part of the company’s strategy to reduce so-called legacy assets, Thompson said today at an investor presentation. Thompson is working with Chief Executive Officer Brian T. Moynihan to decrease the chance of writedowns after the company repaid U.S. bailout funds that were required to bolster capital drained by lending losses.
The U.S. Department of Homeland Security has shut down a website used to disclose the way the department intends to spend money. The Advanced Acquisition Planning system enabled government program managers, private vendors and the general public to track the more than $13 billion in federal contracts issued by the agency every year, according to Bloomberg data. "The system was retired by the Department of Homeland Security on Feb. 28, 2011," according to a statement on the website. No explanation was provided. Federal acquisition regulations require that an advanced acquisition plan be done for any contract expected to exceed $100,000 in order to maximize opportunities for small business participation.
California No Longer 'Magnet' as Rate of Population Growth Slows in Census. California saw higher growth in its inland cities and counties than on the coast and found double- digit increases in its Asian and Hispanic populations over the past decade, according to 2010 Census data released today. Coastal areas tended to be “hostile to business” and development, while jobs and cheaper housing drove people inland, according to Joel Kotkin, author of, “The Next Hundred Million: America in 2050,” a book published last year about the nation’s demographic changes.
Australian Climate Plan Has 'Backfired' on Gillard, Lawmaker Windsor Says. The Australian government’s handling of climate change has “backfired” and Prime Minister Julia Gillard may not get a chance to submit the legislation to parliament, independent lawmaker Tony Windsor said. “I think this has backfired on the government,” Windsor, also a member of the Labor government’s multiparty climate change committee, said today in a phone interview from Bundarra, New South Wales state. “I think people want to see the detail of the climate plan rather than just the framework.” Gillard’s support fell to a record low in a Newspoll published in the Australian newspaper yesterday as voters rejected Gillard’s climate plans. The government wants to introduce a carbon price it hasn’t set from July next year before moving to an emissions trading plan, according a document released by its multiparty committee.
Hacking of DuPont(DD), J&J(JNJ), GE(GE) Were Google(GOOG)-Type Attacks. The FBI broke the news to executives at DuPont Co. late last year that hackers had cracked the company’s computer networks for the second time in 12 months, according to a confidential Dec. 9, 2010, e-mail discussing the investigation. About a year earlier, DuPont had been hit by the same China- based hackers who struck Google Inc. (GOOG) and unlike Google, DuPont kept the intrusion secret, internal e-mails from cyber-security firm HBGary Inc. show. As DuPont probed the incidents, executives concluded they were the target of a campaign of industrial spying, the e-mails show. The attacks on DuPont and on more than a dozen other companies are discussed in about 60,000 confidential e-mails that HBGary, hired by some of the targeted businesses, said were stolen from it on Feb. 6 and posted on the Internet by a group of hacker-activists known as Anonymous. The companies attacked include Walt Disney Co. (DIS), Sony Corp. (6758), Johnson & Johnson, and General Electric Co., the e-mails show. The incidents described in the stolen e-mails portray industrial espionage by hackers based in China, Russia and other countries. U.S. law enforcement agencies say the attacks have intensified in number and scope over the past two years. “We are on the losing end of the biggest transfer of wealth through theft and piracy in the history of the planet,” said Democratic Senator Sheldon Whitehouse of Rhode Island, who chaired a U.S. Senate Select Committee on Intelligence task force on U.S. cyber security in 2010.
Wall Street Journal:
U.S. Sees Stalemate Emerging in Libya. The U.S. believes Col. Moammar Gadhafi has solidified control in parts of Libya, creating a stalemate with rebels and raising the stakes in the Obama administration's internal debate about whether to take military action to help the opposition, officials said. Pro-regime forces pressed into the rebel-held city of Zawiya, near the capital, and appeared to have halted the opposition's momentum to the east in fighting Tuesday. With the struggle appearing to settle into a standoff, the Obama administration, working with allies, looked into options for intervention, while the European Union prepared to announce broader sanctions on the Libyan government, including an asset freeze. Rebels in their base in the eastern city of Benghazi, after first suggesting they had made an amnesty offer to the Libyan leader, denied any back-channel negotiations were under way.
China's Debt Burden Limits Policy Leeway. New Chinese government figures show its national debt load remains low compared with other major economies. But including the debts of local governments and many parts of the state-owned banking sector, as many economists say is proper, shows the constraints facing Beijing in the fight against inflation, its top economic priority. Adding up the official debt data from these other parts of the government as well as from state banks and estimated debt of asset-management companies puts China's total government liabilities at $3.55 trillion, equivalent to 59% of GDP. Some economists who follow the issue say those official data underestimate items like nonperforming loans created by a lending surge over the past two years. Stephen Green, China economist at Standard Chartered Bank, estimates total debt, including contingent liabilities, at 77% of GDP. Arthur Kroeber, managing director of Beijing-based research firm Dragonomics, puts the total debt at 75% of GDP.
In Health Law, Rx for Trouble. A provision intended to limit tax breaks for over-the-counter drugs in the health-care overhaul is creating headaches for doctors and new complications for retailers and pharmacies.
US Official: Pressure Is On Emerging Economies to Change Ways. Emerging economies such as China and India must take steps to improve the openness and access to their markets, a top State Department official said Tuesday, both for the success of international trade talks and the broader effort to rebalance the global economy.
Europe Blinks on Bank Test. Regulators Seen Easing 'Stress' Gauge, Undercutting Effort to Restore Confidence. European officials are poised to let regulators in individual countries use their own definitions of a key gauge of banks' health in coming "stress tests," threatening to undermine efforts to buttress faith in the Continent's ailing financial system. The new European Banking Authority, which is running the tests on 88 of Europe's biggest banks, has told regulators and bankers that the exams are likely to rely on each country's definition of an important capital ratio known as Tier 1, according to people familiar with the matter. If the plan goes through, some skeptical bankers and regulators worry, it could undermine the effort to end the European financial crisis. They fear a rerun of one of the key weaknesses in last year's stress tests by the European Union. Those results were widely panned for giving passing grades to almost all banks, including some that subsequently required taxpayer bailouts. Last year, regulators let each country use a local standard of the Tier 1 capital ratio, a measure of a bank's ability to withstand unexpected losses. That flexibility wasn't widely known when the results were announced, and the differences made it difficult to compare banks across Europe. The latest stress tests would essentially repeat the same process. Banks that fall below a certain capital threshold in a deteriorating economic environment will be forced to raise more capital. The trouble is that regulators in different countries have different methods of calculating the Tier 1 ratio. The stress tests are unlikely to establish a pan-European standard, according to the people familiar with the matter. Some regulators and bank executives worry that the lack of uniformity will damage the tests' credibility. "We're falling into the same trap," said an official at a major European bank.
Unions Oppose Pension Changes in California Talk. A coalition of influential labor groups in California opposes some public-pension changes that Gov. Jerry Brown has considered as part of a compromise with Republican lawmakers, further complicating the governor's hope for a quick resolution to budget talks to close a $26.6 billion deficit, said people familiar with the matter.
Seasoned Prosecutors Prep for 'War'. For the next 10 weeks, prosecutors will battle Galleon Group founder Raj Rajaratnam in courtroom 17B in lower Manhattan. But they will win or lose the insider-trading case in a nearby "war room."
Our Man-Made Energy Crisis. There's plenty of oil and no fundamental reason to expect prices of $200 per barrel. But that doesn't excuse the administration's punitive approach toward the industry.
CNBC:
An Open Letter From an Egyptian CEO. The following is an open letter written by the CEO of a large company based in Egypt. He is not being named out of retribution fears and concerns for his safety ... The situation worsening ... the military is barely holding on ... anarchy extending ... and the original young demonstrators are marginalized already. The economic meltdown is huge. If I may make some suggestions ...
Welfare State: Handouts Make Up One-Third of U.S. Wages. Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement. Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.
Business Insider:
How to Make Sure You Never See Charlie Sheen on the Internet Again. Enough already. If you're as sick of Charlie Sheen as we are, some entrepreneurial developers have found a way to block him from your web browser forever. Mashable found a browser extension from the folks at Free Art & Technology that will erase all mentions of Sheen and buzzwords like #tigerblood and #winning.
We Suffer Unhealthy Budgets, Thanks to ObamaCare. This year's budget battle is only the beginning. Thanks to the new health care law, next year's budget debate is shaping up to be a real battle royale. In mid-February, President Obama released his 2011-2012 budget proposal, which would take effect this year on Oct. 1. Missing from that document was any accounting of the true cost of implementing ObamaCare. "How many federal bureaucrats does it take to carry out President Barack Obama's health care overhaul?" wrote the Associated Press. "Don't expect to find an easy answer in his new budget." The president's budget is so opaque that Rep. Dave Camp, R-Mich.--the chairman of the House Ways and Means Committee, which oversees Medicare and tax laws--has wondered whether Democrats are now trying to hide the costs of their signature piece of legislation. In reality, the president and his congressional allies have obscured the costs of ObamaCare since the beginning. In March of last year, for instance, just a few days before the health care bill became law, the Congressional Budget Office (CBO) identified "at least $50 billion" in costs associated with implementing the law for which the "authority to undertake such spending is not provided." Just a few months later, the Congressional Research Service stated that the number of new federal bureaucracies created by the health care law was "unknowable." So the White House is either hiding the cost of implementation--or simply doesn't know what that cost will be.
Are We Thwarting Medical Innovation?The movement to repeal the health care reform act in the U.S. merely touches the surface of a deeper problem. A better “repeal” agenda would focus on undoing, and re-thinking, much of the FDA regulatory regime and other barriers to innovation in health care. Anyone who has benefited from an MRI exam, a new drug therapy or a high-tech surgical procedure knows the value of biomedical innovation. And anyone with a disorder that still defies effective care knows the need to keep innovation going. What’s more, this innovation pays multiple economic benefits. For over a century, new medical treatments and the businesses that bring them to market have employed millions of people, helping the rest of us to be healthier and more productive in our own lines of work. Yet lately the virtuous cycle has begun to bog down. In the past 15 years, despite a doubling of federal funds for biomedical R&D, the number of new drugs approved by the FDA and coming to market hasdecreased by nearly half — from around 40 per year in the late 1990s to a little over 20 per year since 2005. Pre-market testing to meet FDA requirements has become such a huge factor in drug development budgets that it’s hard for companies to even consider working on new products with limited market potential. Other obstacles have grown too, mostly from a long-running accretion of government controls and bureaucratic bottlenecks.
CNN Money:
National Debt: 'Time for Gridlock is Over'. As lawmakers continued to butt heads over how much spending should be cut over the next seven months, a few senators on Tuesday were trying to keep the focus where they think it belongs -- the next several decades. "The time for gridlock is over. We do not have time to go around the bush and around the bush and around the bush to debate the specifics of our perfect solutions," said Republican Sen. Mike Crapo.
Senator Majority Harry Reid(D-Nev.) Attacks GOP Budget for Trying to Cut Money for Nevada's Cowboy Poetry Festival. Senate Majority Harry Reid (D-Nev.) slammed the Republicans' budget proposal on Tuesday as 'mean-spirited' and complained it would eliminate money for a cowboy poetry festival that brings tens of thousands of tourists to Nevada. “The mean-spirited bill, H.R. 1, eliminates National Public Broadcasting," said Reid in a floor speech. "It eliminates the National Endowment of the Humanities, National Endowment of the Arts. These programs create jobs. The National Endowment of the Humanities is the reason we have in northern Nevada every January a cowboy poetry festival. Had that program not been around, the tens of thousands of people who come there every year would not exist.” The Republican plan would slash $57 billion from the budget for the remainder of fiscal year 2011. That budget is likely to face a vote in the Senate on Tuesday evening.
Politico:
'Sting' Boosts Efforts to Ax NPR Funds. Within hours after a video emerged showing NPR’s fundraising chief disparaging tea partiers as “racist” and saying the broadcaster would be better off without federal funding, Republicans in Congress seeking to de-fund NPR said they’d be only too happy to oblige. “We agree that NPR and PBS would be fine without taxpayer subsidies,” said Sen. Jim DeMint (R-S.C.), a tea party favorite who just last week introduced legislation to stop taxpayer subsidies to public broadcasting. “Forcing taxpayers to give public broadcasting hundreds of millions of dollars makes little sense when we’re facing a $14 trillion debt and there are already thousands of educational and entertainment choices in the media.
USA Today:
Smart Meters Raise Suspicions About Accuracy. Coast to coast, from Maine to Marin County, Calif., the number of homes being outfitted with smart meters that keep a close eye on homeowner electricity use is on the rise. And so is the number of folks who think smart meters are a dumb idea.
Reuters:
Libya No-Fly Zone Should Not Be U.S.-Led Effort - Clinton. The United States wants to see the international community support a no-fly zone over Libya, U.S. Secretary of State Hillary Clinton said on Tuesday, saying it was important it was not a U.S.-led effort. "We want to see the international community support it (a no-fly zone)," she told Sky News. "I think it's very important that this not be a U.S.-led effort because this comes from the people of Libya themselves. This doesn't come from the outside, this doesn't come from some Western power or some Gulf country saying 'This is what you should do.'" She also said it was important that the United Nations make the decision on what to do about Libya, not the United States.
Michigan Workers Jam Capital to Protest Union Plan. In a scene reminiscent of Wisconsin, hundreds of pro-union protesters jammed the Michigan state Capitol on Tuesday to oppose a bill that would give emergency managers authority to break labor deals to revive failing schools and cities.
Ships Entering U.S. to Face New Ballast Water Rules. To keep new invasive species out of U.S. waters such as the Great Lakes, the United States must enact stricter rules on treating ship ballast water under a settlement reached on Tuesday with environmental groups. Under the agreement, the U.S. Environmental Protection Agency will settle on new rules by November that will go into effect in December 2013 to give shippers the chance to comply, conservation groups said. "This settlement should prompt EPA to treat 'living pollution' as aggressively as it would an oil spill or toxic release," said Thom Cmar of the Natural Resources Defense Council, one of the groups involved in the settlement.
Finisar(FNSR) Sees Weak Q4, Shares Plummet. Network equipment maker Finisar Corp forecast a dismal fourth quarter, blaming a surprise inventory pile-up at telecom equipment makers in China, and its shares plunged 38 percent in extended trading. The lower-than-expected outlook casts a pall of gloom on the fiber optics sector, which surged last year as wireless carriers built new LTE networks and invested in optical switches to carry a surge in wireless traffic. Finisar sells components to manufacturers of fiber optic switches that are used to manage and unclog telecom networks. Shares of larger rival JDS Uniphase(JDSU) fell 15 percent to $21.50. Oplink Communications(OPLK) slipped 11 percent, while Occlaro(OCLR) was down 14 pct at $14.31. The weak outlook from Finisar marks the second bad news for the sector in as many days, after fiber optics switch maker Ciena surprised investors with a weak second-quarter outlook. . "Things that we had forecast only at the end of last year...all of a sudden have been reduced dramatically," a Finisar executive said in a conference call with analysts. The company expects reduced order rates and capacity demands in the fourth quarter, but said it would be surprised if the inventory correction lasted three quarters. It added the problem is an industry-wide one now and was not limited to just one customer in China.
Texas Instruments(TXN) Earnings Target Misses Street. Texas Instruments Inc issued a current-quarter earnings target that was slightly below Wall Street estimates, blaming weaker-than-expected demand last month for chips used in personal computers. Shares in TI, which brings in 15 percent of its revenue from the PC market, fell almost 1 percent in after-hours trade, canceling almost all of their gains during regular trading.
Honeywell(HON) Sees Q1 at Upper End of View; To Buy Back Shares. Diversified U.S. manufacturer Honeywell International Inc expects first-quarter sales and profit to be at the high end of its previously provided outlook, and authorized a $3 billion share buyback program. Honeywell, which also reaffirmed its 2011 forecast, said it would buy back shares during 2011 to offset the dilutive impact of employee stock-based compensation plans.
Financial Times:
Top Goldman(GS) Executives on Galleon Witness List. Goldman Sachs'(GS) two most senior executives, Lloyd Blankfein and David Viniar, chief executive and chief financial officer respectively, were among the high-profile names on a list of those who may be called as witnesses in the insider trading trial of hedge fund billionaire Raj Rajaratnam, co-founder of Galleon Group.
Yemeni Army Fires at Student Protesters, Wounding 98. The Yemeni government escalated its efforts to stop mass protests calling for the president’s ouster on Tuesday, with soldiers firing rubber bullets and tear gas at students camped at a university in the capital in a raid that left at least 98 people wounded, officials said. The army stormed the Sanaa University campus hours after thousands of inmates rioted at the central prison in the capital, taking a dozen guards hostage and calling for President Ali Abdullah Saleh to step down. At least one prisoner was killed and 80 people were wounded as the guards fought to control the situation, police said.Yemen has been rocked by weeks of protests against Saleh, inspired by recent uprisings in Egypt and Tunisia that drove out those nations’ leaders. Saleh, a key U.S. ally in the campaign against Al Qaeda, has been in power 32 years.
Xinhua:
Egypt's Muslim-Christian Clash Escalates. Clashes between Egyptian Muslims and Coptic Christians escalated on Tuesday after Coptic protestors blocked a main road in Cairo for more than two hours. Hundreds of salafists, or conservative Muslims, claimed for regaining two women who they believed were held in a church after they proclaimed their Islam belief, state MENA news agency reported. The salafists stressed the importance of not changing the second article of the constitution as the Copts called on in the nationwide demonstration, which affirms that Islam is the only source for jurisdiction. The clashes between salafists and Copts in the Autostrad road in southeast Cairo left at least one Copt dead and five people wounded, according to local media. Meanwhile, thousands of Coptic protestors continued a sit-in for the fourth day Tuesday in front of the Egyptian Radio and TV building protesting over a church that was torched in a village in Helwan Governorate, south of Cairo. They demanded ending of the sectarian clashes against them and rebuilding the burnt Shahedain church. They also called for providing protection for Copts and securing their houses along with paying compensations for the losses inflicted on them. A fight among members of a Muslim family on Friday night over the romantic relationship between a Muslim girl and a Christian merchant left two dead, including the girl's father. After the funeral, crowds of Muslims from the village directed to the Shahedain church and broke into the church before they torched it. Egypt's new Prime Minister Esssam Sharaf promised the Coptic protestors to reclaim the land of the burnt church and rebuild it. Any marriage relationship between Muslim and Christian is forbidden according to Islamic jurisdictions.
China Securities Journal:
China may introduce a new round of control measures on the real estate market if the property prices do not stabilize, citing Jiang Weixin, minister of Housing and Urban-Rural Development. The government may work out more detailed measures on how to contain the rises in property prices, Jiang said.
China Digital Times:
Latest Directives From the Chinese Ministry of Truth, March 2-7, 2011. The following examples of censorship instructions, issued to the media and/or Internet companies by various central (and sometimes local) government authorities, have been leaked and distributed online. Chinese journalists and bloggers often refer to those instructions as “Directives from the Ministry of Truth.” CDT has collected the selections we translate here from a variety of sources and has checked them against official Chinese media reports to confirm their implementation. State Council Information Office: In China 94% Are Unhappy; Top-Heavy Concentration of Wealth March 7, 2011 From the State Council Information Office: All websites are requested to immediately remove the story “In China 94% Are Unhappy; Top-Heavy Concentration of Wealth” and related information. Forums, blogs, micro-blogs, and other interactive spaces are not to discuss the matter.
Evening Recommendations Janney Montgomery:
Rated (RUE) Buy, target $38.
Reiterated Buy on (DKS), target $44.
RBC Capital:
Rated (DISH) Outperform, target $30.
Night Trading
Asian equity indices are -.50% to +.50% on average.
Asia Ex-Japan Investment Grade CDS Index 105.50 -3.0 basis points.
Asia Pacific Sovereign CDS Index 116.75 -2.75 basis points.
Wholesale Inventories for January are estimated to rise +.9% versus a +1.0% gain in December.
10:30 am EST
Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000.000 barrels versus a -364,000 barrel decline the prior week. Distillate supplies are expected to fall by -500,000 barrels versus a -751,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -1,500,000 barrels versus a -3,590,000 barrel decline the prior week. Finally, Refinery Utilization is expected unch. versus a +1.5% gain the prior week.
Upcoming Splits
None of note
Other Potential Market Movers
The weekly MBA mortgage applications report, $21 Billion 10-Year T-Notes Auction, Citi Resources Conference, Wedbush Morgan Tech/Media/Telecom Mgmt Access Conference, UBS Tech Conference, CSFB Equipment/Semis/Networking Conference, UBS Autos Conference, Citi Financial Services Conference, BofA Merrill Consumer Conference, (HRS) analyst meeting, (BHI) analyst conference, (XOM) analyst meeting and the (HON) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and automaker shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 83.85 -.78%
European Financial Sector CDS Index 117.58 -1.20%
Western Europe Sovereign Debt CDS Index 175.17 bps unch.
Emerging Market CDS Index 203.52 -2.44%
2-Year Swap Spread 20.0 unch.
TED Spread 20.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .10% unch.
Yield Curve 283.0 +2bps
China Import Iron Ore Spot $172.80/Metric Tonne -.69%
Citi US Economic Surprise Index +91.20 -2.0 points
10-Year TIPS Spread 2.57% +4 bps
Overseas Futures:
Nikkei Futures: Indicating +65 open in Japan
DAX Futures: Indicating +11 open in Germany
Portfolio:
Higher: On gains in my Retail, Biotech, Tech and Medical longs
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 moves strongly higher off its 50-day moving average, despite just a slight pullback in oil, eurozone debt angst, emerging markets inflation fears and commodity stock weakness. On the positive side, Airline, Road&Rail, REIT, Homebuilding, HMO, Hospital, Bank, Telecom, Computer Service, Computer, Software and Defense shares are especially strong, rising 2.0%+. Small-cap and Cyclical shares are strongly outperforming. (XLF) and (IYR) have also traded well throughout the day. The Transports are surging back above their 50-day moving average on volume. The Saudi sovereign cds is falling -.41% to 128.81 bps and the Israeli sovereign cds is falling -1.68% to 152.59 bps. Moreover, the UK sovereign cds is falling -2.36% to 56.0 bps. The US dollar is catching a bid and looks poised for further near-term gains. The UBS-Bloomberg Ag Spot Index is down -.35%, oil is down -.2% and copper is gaining +.34%. On the negative side, Coal, Oil Tanker, Energy, Oil Service and Ag shares are down on the day. Tech is also underperforming. The avg. US price for a gallon of gas is up another .02/gallon today to $3.53/gallon. It is now up .41/gallon in 19 days. Weekly retail sales rose +2.0% last week versus a +2.6% gain the prior week. This is the smallest weekly gain since the week of March 2, 2010, which is a negative. China Iron Ore Spot is down -10.7% in just over 2 weeks. As well, the US scrap steel benchmark has fallen -6.0% over the last week. Equity investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Speculation by funds in oil is at very extreme levels and likely caps significant near-term upside in the commodity barring any new developments in the region. Banks, Airlines and Homebuilders are leading the way today. I would like to see better quality leadership and volume on further gains. US stocks want to work higher on any stabilization in energy prices, however oil is not trading like a meaningful top is in place, as of yet. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices, more economic optimism, fund inflows, short-covering and bargain-hunting.
Crude Oil Declines as OPEC May Hold Emergency Meeting Amid Libyan Turmoil. Crude oil fell as members of the Organization of Petroleum Exporting Countries discussed whether to hold a special meeting and Libyan rebels prepared an offensive to regain a town. Crude slipped as much as 2 percent after Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting.” Futures trimmed losses as opponents of Libyan leader Muammar Qaddafi sought to recapture Bin Jawad. Goldman Sachs Group Inc. and Bank of America Merrill Lynch today raised oil-price forecasts. “OPEC may schedule a meeting to discuss increasing production,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The OPEC news and signals that the U.S. may release some strategic reserves is making some investors think twice about being long.” Crude oil for April delivery dropped 87 cents, or 0.8 percent, to $104.57 a barrel at 9:41 a.m. on the New York Mercantile Exchange. Futures touched $106.95 yesterday, the highest intraday price since Sept. 26, 2008.
Greek Bond Yields, Swaps Climb to Records Before EU Leaders Discuss Crisis. Greek 10-year bond yields and credit-default swaps surged to a record as borrowing costs increased at a debt sale and before European leaders begin meetings aimed at containing the sovereign debt crisis. Spanish bonds also slid as the government sold debt through banks. Greek bond losses extended declines to a ninth day after the nation’s credit rating was cut by Moody’s Investors Service yesterday. Portuguese 10-year bonds fell for a second day before a notes auction tomorrow. German 10-year bonds dropped amid speculation the nation’s economic growth will add to pressure on central bankers to increase interest rates. “There is quite a lot of peripheral supply that needs to be digested and apparently we’re struggling to find more buying interest at these levels,” said Marcel Bross, a fixed-income strategist at Frankfurt-based Commerzbank AG. “We have these important meetings coming up, where we see some potential for disappointment.” The yield on 10-year Greek bonds jumped as much as 52 basis points to 12.85 percent, the most since Bloomberg began collecting the data in 1988, with the increase in yields the biggest since Oct. 27. The extra yield investors demand to hold the securities instead of German bunds widened to as much as 956 basis points, the most since Jan. 10. The euro fell 0.4 percent to $1.3912. Credit-default swaps insuring Greek government bonds rose five basis points to an all-time high 1,037 basis points, meaning it costs $1.04 million annually to insure $10 million of debt for five years.
Asia Confronts Oil-Price Shock as Central Banks Pressured to Raise Rates. A jump in crude oil costs in excess of 20 percent in the past two weeks is escalating the danger of inflation in Asia, where central banks are already grappling with consumer price pressures fueled by job and spending gains. The Bank of Thailand and Bank of Korea will each raise key interest ratesthis week by a quarter percentage point, median estimates in Bloomberg News surveys of economists show. Malaysia may also be approaching the end of its pause in boosting borrowing costs, as four of 17 analysts polled see a March 11 move, the highest such share since the last increase, in July. “The region is particularly prone to food and oil price shocks as a greater percentage of household income is spent on food and transportation,” said Vishnu Varathan, an economist in Singapore at Capital Economics (Asia) Pte.
Icahn's Activist Funds to Return Fee-Paying Capital to Outside Investors. Billionaire Carl Icahn will return all of the fee-paying capital in his hedge funds, marking the end of a six-year experiment in which he sought to use outside money to gain influence over the companies he targeted for change. Outside investors had already withdrawn much of their money from Icahn’s hedge funds, leaving just $1.76 billion of fee paying assets, according to a copy of a client letter that Icahn filed this morning with the U.S. Securities and Exchange Commission. One reason for the withdrawals from the $7 billion fund group is that it didn’t bar investors from cashing out during the 2008 financial crisis, Icahn said in the letter. “While it may sound ‘corny’ to some, the losses that were incurred by investors in our funds in 2008 bothered me a great deal more, in many respects, than my own losses,” Icahn said in the letter. “I do not wish to be responsible to limited partners through another possible market crisis.”
Confidence at U.S. Small Companies Climbs to Three-Year High, Survey Shows. Confidence among U.S. small companies rose in February to the highest level in three years as hiring and sales expectations increased, a survey showed. The National Federation of Independent Business’s optimism index climbed to 94.5, the highest since the recession began in December 2007, the Washington-based group said today in a statement. The reading compares with the average 100.7 during the previous expansion that started in November 2001. Hiring plans rose to the second-highest level since September 2008, a sign employment may pick up in coming months. At the same time, earnings expectations remained negative, and fewer businesses said it was a good time to expand.
Bank of America(BAC) Says Home-Loan Business in 'Recovery Mode'. Bank of America Corp. (BAC), the largest U.S. lender, said its residential mortgage business is in “recovery mode” after contributing to a net loss last year and will be “transitioning to business as usual” in 2012. The stock advanced in early trading. The commercial- and investment-banking businesses are already transitioning this year and may post what the company considers normalized earnings in 2012 and 2013, Charlotte, North Carolina-based Bank of America said today in a slide show on its website.
Iran opposition leader Mir Hossein Mousavi, whose whereabouts had been unclear for three weeks, is under house arrest, according to his website.
Louisiana Sues BP(BP), Partners for $1 Million a Day Over Spill. BP Plc (BP/) and its partners in the Gulf of Mexico well that blew up should pay the state of Louisiana at least $1 million a day for damages caused by the worst oil spill in U.S. history, state Attorney General Buddy Caldwell said in a lawsuit against the oil company.
McDonald's(MCD) February Same-Store Sales Rise 3.9% on Asia. McDonald’s Corp. (MCD), the world’s biggest restaurant chain, reported sales rose 2.7 percent at stores open at least 13 months in the U.S. last month, missing analysts’ estimates. Analysts had projected a gain of 4 percent, according to the average of three estimates compiled by Bloomberg. Global comparable sales increased 3.9 percent, the Oak Brook, Illinois- based company said today in a statement. Analysts had estimated same-store sales would rise 3.8 percent.
Cotton Futures Plunge by Daily Limit After Rally to Record Seen Overdone. Cotton dropped by the daily maximum, slumping for the first time in eight days, as recent gains to a record were seen as exaggerated and investors sold the fiber to lock in profits. May-delivery cotton fell 7 cents, or 3.3 percent, to $2.0714 a pound on ICE Futures U.S. Before today, the price gained 21 percent in seven days, the longest rally since September 2009.
Clean-Energy Guarantees Should Be Probed for Record-Keeping, Lawmaker Says. Lax record-keeping at the U.S. Energy Department underscores the need for an investigation into the agency’s loan guarantees for clean-energy projects, the head of the House Energy and Commerce Committee said. The Energy Department’s inspector general said in a report released yesterday that the department’s loan guarantees haven’t met U.S. standards for record-keeping. “The lack of accountability identified by the IG is exactly why Congress is investigating this loan program,” Fred Upton, the Michigan Republican who heads the energy panel, said today in an e-mailed statement.
Europe May Face More Ratings Cuts, Greek Default, S&P Says. Some countries in the euro region may have their credit ratings cut further while a Greece debt default is a “possibility,” said Moritz Kraemer, managing director of European sovereign ratings at Standard & Poor’s. Asked if the worst was over for the region’s sovereign credit-rating outlook, Kraemer said: “I wish I could say yes, but the answer is no.” “We still have a number of countries with a negative outlook or CreditWatch negative, indicating their credit ratings may be going down further,” Kraemer said in an interview in London. “Trigger points for that could be slippage in fiscal consolidation and structural reforms, but also decisions that will be taken at the European level later this month.”
Senate Said to Be Nearing Bill to Delay 'Swipe' Fee Rules. A bipartisan group of U.S. senators is drafting legislation that would delay the implementation of debit-card “swipe” fee rules that banks say would cost them billions of dollars in annual revenue, according to two Senate aides with knowledge of the plan.
BofA Segregates Almost Half of its Mortgages Into 'Bad Bank'. Bank of America Corp. (BAC), the biggest U.S. lender by assets, is segregating almost half its 13.9 million mortgages into a “bad” bank comprised of its riskiest and worst-performing “legacy” loans, said Terry Laughlin, who is running the new unit. “We are creating a classic good bank, bad bank structure,” Laughlin told investors at a meeting in New York today. He was promoted last month to manage the costs of resolving disputes stemming from the company’s 2008 purchase of Countrywide Financial Corp. “We’re going to get after this, we’re going to do it the right way and we’re going to put it to bed in the next 36 months,” he said.
Wall Street Journal:
Gadhafi Loyalists Launch New Attacks. Forces loyal to Col. Moammar Gadhafi have launched a new round of attacks on rebel positions, keeping up a counteroffensive to prevent the opposition from advancing toward the capital Tripoli, as Col. Gadhafi's inner circle is debating whether the man in charge of Libya since 1969 should remain in power or relinquish his role.
Expectations Low for EU Talks.Market expectations that Europe's leaders will agree on a strong and flexible bailout fund to resolve the continent's debt crisis aren't likely to be met, said two senior government officials from within the currency area. The proposals to beef up the European Financial Stability Facility, or EFSF, are encountering growing German intransigence after Berlin failed to achieve its own agenda for reforming euro-zone economies. In recent meetings, German officials have shown an increasing unwillingness either to strengthen Europe's temporary bailout mechanism or to augment its powers, as Germany is forced to compromise on its own program
European Gasoline Hits All Time Record of $8.632 Per Gallon.This breaks the 2008 record of €1.61 per liter. Translated into American this means that a gallon of gas in Europe is now an unprecedented $8.632 per gallon, which will certainly result in Europe literally and metaphorically grinding to a halt.
Christians and Muslims Clash in Egyptian Capital. Clashes between Christians and Muslims have escalated in a day of violent protests in Egypt's capital. Soldiers fired shots in the air to break up the clashes that broke out south of the capital while people burned tires and smashed parked cars. Earlier Tuesday, thousands of Christians demonstrated in two other Cairo locations against perceived persecution by the country's Muslim majority. Hundreds of Egyptian women demanding equal rights and an end to sexual harassment also were confronted by men who verbally abused and shoved them in a separate protest on Cairo's central Tahrir Square. Tensions remain high nearly a month after mass protests ousted President Hosni Mubarak.
Apple(AAPL) Ships Over 1 Million MacBook Airs in New Notebook's First Quarter. Concord Securities analyst Ming-Chi Kuo tells AppleInsider that his most recent checks in Asia indicate Apple shipped a total of 1.1 million of its 11- and 13-inch MacBook Airs during the three-month period ending December, making the new breed of ultra-thin portables one of the company's most successful Mac product launches ever. Those figures are about 63% higher, or 400,000 units more, than the 700,000 units that Kuo had initially estimated.
Pittsburgh Post-Gazette:
Corbett Swings Budget Ax at Schools, Colleges. Making good on his promise not to raise taxes, Gov. Tom Corbett this morning released a $27.3 billion budget, slashing $866 million out of current spending through cuts in virtually every spending area. The cuts bring spending back to 2008-09 levels.
Freshman Democrat Joe Manchin: Obama Has 'Failed to Lead' on Budget. West Virginia Sen. Joe Manchin ripped President Barack Obama on his budget proposals in a Senate floor speech Tuesday, a rare rebuke from a freshman Democrat who clearly is worried about the politics of deficit spending as he faces a tough reelection in 2012. Manchin charged the president with failing to lead the way in reducing spending, while also criticizing Republicans for offering “partisan” and “unrealistic” budget proposals. “Why are we doing all this when the most powerful person in these negotiations — our president — has failed to lead this debate or offer a serious proposal for spending and cuts that he would be willing to fight for?”
Iran Forces Fire Teargas to Disperse Opposition Backers. Iranian security forces fired teargas to disperse anti-government protesters in Tehran on Tuesday, the opposition website Kaleme reported. The authorities, seeking to avoid revival of the mass anti-government rallies that erupted after the disputed 2009 presidential vote, had warned against any "illegal" gatherings by the opposition after websites called for rallies on Tuesday.
Financial Times:
Hedge Funds Bet Oil Prices to Rise Past $150. Hedge funds are placing aggressive bets that crude prices could rise past $150 a barrel if the unrest in the Middle East spills over into Saudi Arabia, the world’s top oil exporter. The number of call options giving holders the right to buy US crude at $150 by June have surged more than 40 per cent in the past week to contracts equal to 32m barrels.
Handelsblatt:
European banks will have to withstand a .5% contraction of gross national product in the Eurozone this year as part of the European Banking Authority's stress tests, citing information the authority sent to banks. The simulation also includes a .2% contraction in 2012 as well as a slump in the real estate markets.
