Friday Watch

Evening Headlines
Bloomberg:

• Workers to Resume Water Dousing as Meltdown Risk Eases at Fukushima Plant. Fukushima Dai-Ichi power plant workers plan today to resume dousing the damaged reactor structures with seawater from fire trucks, following progress overnight to prevent a nuclear meltdown. Tokyo Electric Power Co. said it will finish reconnecting a power line to the cooling system of the No. 2 reactor this afternoon, where white smoke or steam was observed wafting above. Radiation levels there showed a consistent decline from the early hours of March 17 to today, Kyodo News reported, citing data compiled by Japan’s Nuclear and Industrial Safety Agency. The U.S. military, which is flying unmanned surveillance drones over the site at Japan’s request, is “cautiously optimistic” that the damage to the reactors can be contained, the head of the U.S. Pacific Command said.
• Japanese Stocks Climb as BOJ, G-7 Begin Intervention in Currency Markets. Japanese stocks climbed, paring their worst weekly performance since 2008, as the yen tumbled after the Bank of Japan and some Group of Seven countries said they began intervening in currency markets as the country battles to control a nuclear accident. Honda Motor Co., Japan’s second-largest carmaker by sales, jumped 2 percent. Bridgestone Corp., the world’s largest tiremaker, rallied 2.7 percent. Tokyo Electric Power Co., Asia’s largest utility which is struggling to prevent a meltdown at a nuclear power plant, rose for the first time this week. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, climbed 2.8 percent. The Nikkei 225 Stock Average rose 2.7 percent to 9,206.94 as of 9:59 a.m. in Tokyo. The broader Topix Index jumped 2.4 percent to 829.91 with all 33 industry groups in the gauge advancing. The measures have lost 10 percent and 9.3 percent this week respectively. “The yen’s move gave a temporary relief to the market, and reacted to the recent overselling,” said Shintaro Takeuchi, who helps manage about $20 billion at Tokio Marine & Nichido Fire Insurance Co. “But the impact on corporate profits from the nuclear power plant fallout is far bigger than the strong yen,” and the market’s gains won’t last too long. The yen depreciated 2.9 percent to 81.32 per dollar as of 9:25 a.m. in Tokyo from 78.89 yesterday in New York. It reached 76.25, the highest level against the dollar since World War II, yesterday in New York as increased risk of radiation leaks from a crippled nuclear power station boosted speculation Japanese investors will bring home overseas assets.
• The cost of insuring Japanese sovereign and corporate debt from non-payment declined, according to traders of credit-default swaps. Five-year swaps on Japan decreased 5 basis points to 112.5 basis points as of 9:10 am in Tokyo, while the Markit iTraxx Japan index of corporate borrowers fell 15 basis points to 135, according to Citigroup Inc.
  
• Contracts insuring Tokyo Electric Power Co.'s debt against default dropped 50 basis points to 315 basis points as of 10:16 a.m. in Tokyo, according to Royal Bank of Scotland Group Plc prices.
• UN Security Council Approves Military Action Against Qaddafi. authorized a no-fly zone and other military action to prevent Libyan leader The United Nations Security CouncilMuammar Qaddafi from making good on his threat to conquer the rebel capital, Benghazi, and “destroy” the opposition movement. The council provided the legal basis for the U.S., France, the U.K. and several Arab nations to intervene in the Libyan conflict to avert a feared bloodbath if Qaddafi defeats the opposition.
  
• Oil Surges as UN Approves Libya No-Fly Zone. Oil surged in New York after the United Nations Security Council voted to ground Libyan leader Muammar Qaddafi’s air force as continuing unrest in the region renewed concerns that the turmoil may spread and disrupt supply. Futures jumped as much as 2.2 percent after the UN voted to adopt a resolution that establishes a no-fly zone over Libya and demands a cease-fire with rebels. Oil surged 3.5 percent yesterday, the most in three weeks, after Qaddafi’s jets dropped bombs around Benghazi while Bahraini security forces arrested opposition leaders. Brent crude oil for May settlement climbed $1.15, or 1 percent, to $116.05 a barrel on the London-based ICE Futures Europe exchange. Yesterday, the contract advanced $4.30, or 3.9 percent, to $114.90.
• Bahrain Funeral May Spark More Protests After Opposition Leaders Arrested. Bahrainis will gather in the village of Sitra today to mourn the death of a protester, a day after Bahraini security forces arrested opposition leaders and accused them of having ties with foreign countries. Bahrain has been struggling to quell more than a month of protests led by Shiites calling for democracy and increased civil rights. About a dozen people have been killed in the protests. Late last night residents of Sitra went to their rooftops and called out “God is great” over 15 minutes in protest of the government’s violent crackdown on the demonstrators. The funeral for Ahmed Farhan is slated for 8 a.m. local time. “What happened to my son, must happen to the King’s son and family. Look what they did to us,” said Khadija Salman Ali, 52, the mother of Ahmed, in an interview from Sitra. This month, a funeral in Sitra, which is a small island off the Bahrain coast, drew tens of thousands of mourners and developed into a protest.
• Stress Test Banks, EU Capital Pass Rate Undecided a Month Before Deadline. European Union regulators have yet to agree on which banks to test as part of annual exams on capital, or what the passing grade will be, a month before an April deadline for disclosure of stress test methodology. The stress tests will apply to a “wide sample of European banks covering over 60 percent of total EU banking assets,” the European Banking Authority, the agency carrying out the tests, said in a statement today that didn’t identify the banks to be examined. The regulator said earlier this month that it would list the banks by today.
• As European officials scorn ratings companies for their downgrades of euro-area nations, credit markets have an even lower assessment of the debt, a sign the agencies may have it right. Credit default swaps tied to Portuguese debt imply a sub-investment-grade rating of B3, nine steps below the nation's current A3 ranking, according to NY-based Moody's capital markets research group.
  
• Solar Rally on Japan's Nuclear Crisis May Fizzle, Investors Say. The rally in solar shares after Japan’s atomic accident may fizzle because the crisis won’t quickly boost demand for renewable power, investors including First Empire Asset Management’s Michael Obuchowski said. “The hysteria that helped run up solar stocks was not warranted by the damage in Japan,” Obuchowski, chief investment officer of the Happauge, New York-based firm that owns shares in First Solar Inc.(FSLR), said in an interview.

Wall Street Journal:

• U.N. Clears Way for Attack on Libya. U.S., Europe Ready to Launch Air Strikes Against Gadhafi Forces; Rebels' Worsening Plight Jolts White House to Act. The United Nations Security Council authorized military force Thursday against Libyan leader Col. Moammar Gadhafi's security forces, opening the way for European and U.S. airstrikes within days. The U.N. action, pushed aggressively by France and the U.K., came as Col. Gadhafi's security forces continued their assault toward Benghazi, the de-facto capital of rebels trying to end his 42-year rule. European and American officials argued on the Security Council floor that an international campaign to stop Col. Gadhafi's forces was required immediately to stave off a potential massacre of opposition forces and civilians. French officials have indicated that military strikes could take place within hours of the resolution's passage. Others were more cautious about how quickly any attacks would begin.
• Japan Reassures, Others Flee. The U.S. government, signaling distrust of reports from Japan about the nuclear crisis there, moved Thursday to evacuate U.S. citizens and set up its own channels of information—a step echoed by some American companies that laid plans to trim their operations in the stricken country. In the latest sign of international skepticism about progress at Japan's crippled Fukushima Daiichi nuclear facility, the U.S. embassy in Tokyo said Thursday that the government would arrange to fly U.S. citizens out of Japan to safe havens elsewhere in Asia, using military aircraft if necessary. The U.S. also moved aggressively to assert control over information about the scope of the nuclear disaster by flying a military drone aircraft and a U2 spy plane over the plant to get a first-hand assessment of the damage. As dawn broke Friday, a week after a massive earthquake and tsunami devastated Japan, live television showed white steam billowing from several of the severely damaged nuclear reactors at the crippled nuclear plant, suggesting water continues to evaporate from a dangerously overheating pool used to store spent nuclear fuel.
• Sony(SNE): 6 Manufacturing Plants In Japan Haven't Resumed Production as of Friday.
  
• Details Emerge On Workers Toiling Inside Nuclear Plant. As the battle to tame the nuclear crisis entered its seventh day, many Japanese turned their attention to the fate of the workers inside.
• Egypt Said to Arm Libya Rebels. Egypt's military has begun shipping arms over the border to Libyan rebels with Washington's knowledge, U.S. and Libyan rebel officials said. The shipments—mostly small arms such as assault rifles and ammunition—appear to be the first confirmed case of an outside government arming the rebel fighters. Those fighters have been losing ground for days in the face of a steady westward advance by forces loyal to Libyan leader Moammar Gadhafi.
• Nasdaq(NDAQ), ICE(ICE) Trip Up on NYSE Bid Terms. Lingering differences between Nasdaq OMX Inc. and potential partner IntercontinentalExchange Inc. are among the issues delaying a move toward a counterbid for NYSE Euronext(NYX), people familiar with the matter said. Financing for Nasdaq's bid is also facing hurdles, as banks tighten terms because of uncertainty in global financial markets, these people said.
• Crisis Tests Supply Chain's Weak Links. Companies around the world are scrambling to retool their supply chains as they cope with the Japan earthquake—and many are finding they might not be as well-prepared as they thought.
• Progressive Government is Obsolete by Stephen Goldsmith. Today's regulations stifle government workers at a time when getting value for tax dollars is more important than ever.

Bloomberg Businessweek:

• Boom Times for Genomics Startups. Investment is picking as sales of gene sequencing machines surge.

CNBC:

• Goldman(GS) Cuts 5% of Trading Desk, More Layoffs Likely.
• Banks Await Test Scores; Investors Wait for Dividends. The Federal Reserve on Friday will deliver the results of its latest stress tests to 19 of the country's systemically important banks. It's expected that after months of waiting, some of the healthiest among the group will be allowed to raise their dividends and initiate stock buybacks immediately, while others may have to wait. None of the banks will be allowed to discuss the results of their stress tests.

Business Insider:

• Fukushima: Vivid New Video Shows Horrible Wreckage At The Nuke Plant.

Zero Hedge:

• No Bubble: Owner Hires Crew to Wreck His $289,000 Gallardo In Protest Against Chinese Consumer Rights. (pics)

Forbes:

• Newspaper Guild Asks Writers to Boycott Huffington Post. That cute little boycott of the Huffington Post just got about 520 times more interesting. The Newspaper Guild, which represents 26,000 U.S. media-industry workers (34,000 if you include Canada and Puerto Rico) is endorsing a call by Visual Arts Source magazine (staff size: 50) to stop providing free content to Huffpo now that it acquisition of AOL has made a fortune for its founders.
• Consumers Feel The Heat As Prices Rise And Real Wages Drop. Consumers’ wallets continue to take the hit, as the latest batch of numbers from the Bureau of Labor Statistics shows that prices were up 0.5% in February on higher food and energy costs, while real average hourly earnings fell by the same amount, as the workweek and wages remained stagnant but suffered at the expense of rising inflation.
• Japan's Nuke-Plant Battle May Take Weeks, US Says. Emergency workers seemed to try everything they could think of Thursday to douse Japan's most dangerously overheated nuclear reactors: helicopters, heavy-duty fire trucks, even water cannons normally used to quell rioters. But they couldn't be sure any of it was easing the peril at the tsunami-ravaged facility.

Institutional Investor:

• Paulson Losing Money Through Mid-March. John Paulson continues to struggle this year. The gold bug’s Paulson Advantage Plus fund lost 4.42 percent in the first two weeks of March alone, through last Friday. As a result, the Event Driven hedge fund was down 1.76 percent for the year through March 11, according to an investor. The S&P 500 was still up around 3.7 percent for the year through last Friday.
  

Talking Biz News:

• Reuters Hedge Fund Reporter Leaving For WSJ. Emily Chasan, the senior hedge fund correspondent for Reuters in New York, has resigned from the wire service to accept a job at The Wall Street Journal, three sources at Reuters confirmed to Talking Biz News. Chasan will be working on a new product being geared toward chief financial officers that will be announced soon.

The Hill:

• Frank Wants Wall St. to Pay for Housing Relief. Rep. Barney Frank (D-Mass.) wants hedge funds and major financial institutions to foot the bill for housing relief programs, under a new bill he introduced Thursday. The ranking member of the House Financial Services Committee unveiled legislation that would direct the Treasury Department to tap Wall Street for billions. Under the Emergency Mortgage Relief and Neighborhood Stabilization Program Cost Recoupment Act of 2011, the Treasury would claim $2.5 billion from hedge funds with over $10 billion in assets and other financial companies with $50 billion or more.

USA Today:

• Soaring Food Prices Send Millions Into Poverty, Hunger. Corn has soared 52% the past 12 months. Sugar’s up 60%. Soybeans have jumped 41%. And wheat costs 24% more than it did a year ago. For about 44 million people — roughly the population of the New York, Los Angeles and Chicago metropolitan areas combined — the rise in food prices means a descent into extreme poverty and hunger, according to the World Bank.

Reuters:

• Sodexo Sues SEIU Over Tactics to Unionize Workers. The American unit of French catering giant Sodexo SA on Thursday filed a civil racketeering lawsuit accusing the Service Employees International Union of engaging in illegal tactics in its efforts to unionize workers.
• Nike(NKE) to raise prices sharply as costs hit gains. Nike Inc plans to raise the prices on its shoes and sports clothing markedly in 2012 to cope with the rising costs of oil, cotton and transportation that are hurting its profitability. The shares in the the world's largest athletic shoe and clothing maker plunged 7 percent on fears that already stretched margins will come under even greater pressure this year and next. It reported a lower-than-expected quarterly profit on Thursday, hurt by rising production costs. The company expects margin pressures to persist this year, intensifying in the current quarter. "This is evidence that rising input costs are hurting Nike's profit," said Giri Cherukuri, a portfolio manager with OakBrook Investments, which owns Nike shares. "Nike's margins will be under pressure for the rest of the year." To contend with that, Nike executives said the company would ramp up and broaden its price increases.

Financial Times:

• GE(GE) Works to Limit Japan Impact as Investors Fear Financial Losses. General Electric, the largest US industrial group, has set up an emergency response centre at the headquarters of its nuclear business in Wilmington, North Carolina, staffed round the clock to provide advice to the team battling to bring the stricken Fukushima Daiichi nuclear plant under control. The unfolding disaster could swing public opinion against nuclear power in general, and against GE, which supplied reactors for the plant and still has a substantial nuclear business, in particular.

Telegraph:

• Japan Risks Credit Crunch as Yen Thunders. Japan is in imminent danger of a credit-crunch with global implications unless the authorities stabilise Tokyo's stockmarket and take overwhelming action to stop the yen exploding to record levels. Akito Fukanaga from RBS warned of a "financial shock" as banks and insurers comes under strain, and investors focus on the nexus of structured products linked to the yen. "Preventive measures on the financial front are urgently needed. Sentiment has declined severely and there are concerns over capital erosion at financial institutions. Lower stock prices and yen appreciation are on the verge of triggering a credit crunch," he said.

BBC:

• Libya: UK Forces Prepare After UN No-Fly Zone Vote. The U.K.'s armed forces could be in action over Libya by tomorrow should the United Nations pass a resolution enacting a no-fly zone tonight, citing unidentified senior government people. Air strikes could begin with unilateral actions by the British and French air forces, with logistical support from Arab allies.

NHK:

• Live Japanese News Broadcast in English.

Kyodo News:

• Radiation levels near the Fukushima Dai-Ichi nuclear power plant dropped slightly after Japanese Self Defence Forces used water cannons to douse the plant yesterday, citing the Nuclear and Industrial Safety Agency. The radiation level dropped to 279.4 microsieverts per hour as of 5 a.m. today, down from 292.2 microsieverts at 8:40 p.m. yesterday.
• Japan may restore power to the No. 3 and No. 4 reactors at Tokyo Electric Power Co.'s damaged plant on Sunday, citing the nation's nuclear agency.

TBC/JNN:

• Dramatic video shows people fleeing Sendai in wake of Japan quake and tsunami.

Xinhua:

• China has "serious difficulty" with part of a UN Security Council resolution on Libya, citing Li Baodong, the Chinese permanent representative to the UN.

Evening Recommendations
Citigroup:

• Reiterated Buy on (DO), target $90.
• Reiterated Buy on (FDX), raised estimates, target $110.

Night Trading

• Asian equity indices are unch. to +1.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 111.50 -6.5 basis points.
  
• Asia Pacific Sovereign CDS Index 122.0 +.25 basis point.
  
• S&P 500 futures +1.0%.
  
• NASDAQ 100 futures +.99%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PERY)/.67

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The (EXBD) investor day could also impact trading today.
  

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

Stocks Rising into Final Hour on Short-Covering, Less Eurozone Debt Angst, Japan Equity Rally, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 26.78 -9.05%
  
• ISE Sentiment Index 129.0 +67.53%
  
• Total Put/Call 1.09 -6.84%
  
• NYSE Arms .66 -78.45%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 89.53 -.96%
  
• European Financial Sector CDS Index 110.21 -4.51%
  
• Western Europe Sovereign Debt CDS Index 170.0 bps -2.49%
  
• Emerging Market CDS Index 222.20 -.76%
  
• 2-Year Swap Spread 21.0 +1 bp
  
• TED Spread 23.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .07% -2 bps
  
• Yield Curve 265.0 +1 bp
  
• China Import Iron Ore Spot $163.90/Metric Tonne +.18%
  
• Citi US Economic Surprise Index +63.80 +3.6 points
  
• 10-Year TIPS Spread 2.44% +6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -122 open in Japan
• DAX Futures: Indicating -16 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech and Medical longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is just mildly bullish as the S&P 500 gives up some opening gains, despite a bounce in Japanese equities, strong gains in Europe, mostly positive economic data and recent stock losses. On the positive side, Road & Rail, Wireless, Oil Service, Energy and Coal shares are especially strong, rising more than 2.0%. Cyclicals are outperforming. Copper is jumping +3.7% and Lumber is surging +3.07%. The Belgium sovereign cds is falling -3.49% to 142.67 bps and the Japan sovereign cds is falling -4.22% to 108.41 bps. Moreover, the US Muni CDS Index is falling -2.26% to 150.25 bps. The AAII % Bulls fell to 28.49, while the % Bears surged to 40.12, which is also a positive. On the negative side, Airline, Education, Restaurant, Retail, Hospital, Disk Drive, Internet and Oil Tanker shares are down on the day. (IYR) is relatively weak. Tech shares also continue to underperform. Singapore Electronics Exports fell -12.8% y-o-y in February, which was the worst showing since October 2009. China Iron Ore Spot has declined -14.2% in about 1 month. Oil is jumping +3.1% and gold is rising +.54%. The Israeli sovereign cds is rising +1.92% to 154.79 bps. The avg. US price for a gallon of gas is unch. today at $3.55/gallon. It is up .43/gallon in 30 days. Action in the tech sector is worrisome, notwithstanding today's bounce. News that the Fed will approve some bank dividend hikes on Friday is boosting (XLF) this afternoon. As well, (EWJ) is firming after a mid-day swoon. I still suspect that global growth is slowing more than economists perceive right now and that this is not factored into most stocks. As well, one more large surge in oil will likely once again result in equity market weakness. Breadth and volume are unimpressive on today's rally. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bank sector strength, bargain-hunting and less eurozone debt angst.

Today's Headlines

Bloomberg:

• Conflicting Information Drives Fear in Japan Reactor Disaster. Accurate and timely information from Tokyo Electric Power Co. about the accident at its nuclear plant in northern Japan has been hard to come by. About 60 reporters at a March 16 briefing with utility officials wanted to know whether helicopters would dump seawater on reactors at the Dai-Ichi station to prevent a meltdown. The company was considering the plan, said Masahisa Otsuki, head of the nuclear maintenance division. At the same time, a live broadcast on a nearby TV screen showed a helicopter taking off with a massive bucket of water hanging from its belly. Reporters barraged the officials. “We are sorry,” a spokesman said. “We need to check on this.”
• Radiation Testing Weighed for Japanese Food Imports, U.S. Regulators Say.
  
• Bahrain Arrests Four Opposition Leaders as Crackdown Widens. Bahraini police arrested at least four opposition leaders a day after imposing a military curfew on parts of the country and forcing protesters from a central roundabout in the capital. Those arrested included Hassan Mushaima, a leader of the Shiite Haq movement, and Ebrahim Sharif, head of the opposition National Democratic Action Society, according to a statement today from al-Wefaq, the largest Shiite opposition party in the country. Mushaima’s Haq party boycotted October parliamentary elections, calling them illegitimate.
• Industrial Production in U.S. Falls .1%; Manufacturing Gains. Production at U.S. factories increased for a sixth month in February, indicating manufacturing will keep stoking the economy and underscoring the Federal Reserve’s view of a stronger expansion. The 0.4 percent rise in manufacturing output, which makes up 75 percent of all industrial production, followed a 0.9 percent January gain that was three times as large as initially estimated, Fed figures showed today. A gauge of Philadelphia- area factories unexpectedly climbed to a 27-year high.
• Consumer Comfort in U.S. Drops to Lowest Level Since August. Consumer confidence plunged last week to the lowest level since August as rising gasoline prices made Americans more pessimistic about the economic outlook and their finances. The Bloomberg Consumer Comfort Index dropped to minus 48.5 in the period to March 13 from minus 44.5 the prior week. Sentiment fell across most income and age groups and worsened for all education levels. Higher gasoline prices persisted for another week, becoming a bigger concern for Americans already dealing with rising grocery bills. The report showed confidence among households with annual incomes exceeding $100,000 fell to the lowest level in November, posing a risk for consumer spending, the biggest part of the economy. “Consumers across different income and demographic groups are feeling the pain of rising prices at the pump,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “It’s even biting those making more than $100,000, and they’re the ones who’ve been a primary driver of the recovery. It’s likely to restrain growth this quarter.” The Bloomberg comfort index, which began December 1985, fell to a record low of minus 54 in November 2008, while the peak of 38 was reached in January 2000. An index of the buying climate fell to minus 57.4, the lowest since October 2009, from minus 53. Those saying it was a good time to buy needed items plunged to 2 percent from 20 percent the previous week. The average price of regular gasoline at the pump climbed another 5 cents to $3.56 a gallon in the week ended March 13, according to AAA, the nation’s biggest motoring organization. That followed a gain of 14 cents the prior week and 20 cents a week before that. The report is “showing trouble across the board,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.
• China Shoppers Hoard Salt as Protection on Fear Japan Radiation to Spread. Chinese shoppers cleared shelves of salt, viewed as a defense against radiation exposure, as the government sought to allay concern that fallout from a stricken Japanese nuclear facility might reach its shores. The Ministry of Environmental Protection released a chart on its Web site showing radiation levels in 41 cities, from Dalian in the northeast to Tibet in the west are within normal ranges. People shouldn’t take potassium iodide tablets used to combat radiation unless the government recommends it, the Center for Disease Control and Prevention said on its site.
• India Raises Interest Rates for Eighth Time in a Year to Reduce Inflation. India’s central bank increased interest rates for the eighth time in a year after raising its inflation forecast twice in three months. Stocks and bonds fell. The Reserve Bank of India raised the repurchase rate to 6.75 percent from 6.5 percent, according to an e-mailed statement today. All 26 economists in a Bloomberg News survey had predicted the decision. It boosted the reverse repurchase rate to 5.75 percent from 5.5 percent. Governor Duvvuri Subbarao extended the steepest rate increases among Asia’s major economies after the government last month unveiled plans to lower taxes and boost spending. The Reserve Bank also has to contend with the impact of higher oil prices on inflation, which cuts purchasing power in a nation where the World Bank says more than three-quarters of the people live on less than $2 a day. “The RBI needs to tighten more to bring inflation under control,” said Devika Mehndiratta, a Singapore-based economist at Credit Suisse Group AG. “Price pressures are building up quite sharply.” Mehndiratta expects a half-point increase in rates by September. India’s key wholesale-price inflation quickened to 8.31 percent in February, led by manufactured product costs. The Reserve Bank today raised its March-end inflation forecast to 8 percent from 7 percent, according to the statement. “The underlying inflationary pressures have accentuated, even as risks to growth are emerging,” the central bank said in the statement. “As domestic fuel prices are yet to adjust fully to global prices, risks to inflation remain clearly on the upside, reinforced by the persistence of demand-side pressures.”
• FedEx(FDX) Surges After Quarterly Profit Forecast Beats Estimates. FedEx Corp. (FDX), operator of the world’s biggest cargo airline, climbed the most since July after predicting higher profit this quarter than analysts estimated amid the global economic recovery. The stock jumped as much as 6 percent after FedEx said per- share earnings for the fiscal fourth quarter ending May 31 will be $1.66 to $1.83 a share. Analysts had projected $1.66, the average of 22 estimates in a Bloomberg survey.

Wall Street Journal:

• Japan Claims Modest Gains in Bid to Cool Nuclear Plant. Japanese authorities claimed modest gains Thursday in their efforts to tame a heavily damaged nuclear-power plant that has caused worries around the world, but increasing international skepticism and troublesome levels of radiation on the ground underscored the ongoing difficulties. Authorities attempted to douse the troubled Fukushima Daiichi nuclear-power complex with some 100 tons of seawater on Thursday using helicopters and fire trucks, an urgent effort to combat rising temperatures in two storage pools for spent nuclear fuel. Radiation levels at the site fell slightly.
• U.S. Seeks Range of Strikes on Libya at U.N. The Obama administration is seeking a U.N. Security Council resolution that would authorize a wide range of possible military strikes against the forces of Libyan leader Col. Moammar Gadhafi, aimed at preventing them from overrunning rebels and civilians in the country's east, officials said. In discussions with other U.N. Security Council members, the Obama administration is making the case that a no-fly zone alone would be "insufficient" to save the rebel capital of Benghazi, in eastern Libya. The Obama administration is seeking a broad U.N. authorization for strikes aimed at holding back Libyan ground and air forces with the aim of protecting Benghazi and avoiding a humanitarian crisis there. Military operations could include a no-fly zone but would not be limited to that, officials said.
• Investor Criticizes Shadow Market. Ben Horowitz, a prominent Silicon Valley venture capitalist, criticized the unregulated "shadow market" that has fueled trading in shares of technology start-ups like Facebook Inc. and Twitter Inc. before they go public. Mr. Horowitz, a partner at Andreessen Horowitz, said these secondary markets operate with "asymmetric" information and often "inflate" private share prices. He said regulators may decide to step in if smaller investors start getting hurt.
• Europe Banks Won't Get Stress Test Capital Minimum Rules Fri - BdB. European banks asked to take part in the European Union's stress test aren't likely to get the long-awaited rules on minimum capital required to pass by Friday, the BdB lobby group representing German commercial banks said Thursday.
• Interview: Globalfoundries Assessing Japan Impact on Silicon Supply. Contract chip maker Globalfoundries is assessing the impact of a disruption of silicon supply out of Japan on its business, with Japan's natural disaster highlighting the challenge of managing risk in global distribution in the semiconductor industry, the head of its major shareholder said Thursday. "Twenty percent of the entire semiconductor industry comes from Japan, but a lot more than that is silicon from Japan," Ibrahim Ajami, chief executive officer of Advanced Technology Investment Co., or ATIC, told Zawya Dow Jones in an interview.
• Japanese Ministry of Finance: 'Ready for Battle'. One of the biggest mysteries about the recent volatility in the markets related to Japan is when Japanese authorities would intervene in the markets to stabilize the wild swings we’ve seen recently in the yen. There are recent signs that officials there are trying to jawbone the financial markets into backing off from betting big on swings in Japanese markets. Bradley Davis of Dow Jones Newswires reports:
• Law School Loses Its Allure as Jobs at Firms Are Scarce. Student applications to law schools are down sharply this year, as college seniors grow leery of a degree that promises certain debt and uncertain job prospects. The number of law-school applicants this year is down 11.5% from a year ago to 66,876, according to the Law School Admission Council Inc. The figure, which is a tally of applications for the fall 2011 class, is the lowest since 2001 at this stage of the process.

Business Insider:

• Gasparino: Lloyd Blankfein is Ready to Leave Goldman(GS). According to Gasparino, Lloyd Blankfein's friends say he's on the way out.
• EU Sets Out to Crush Ireland.
• Dramatic Pictures of Dark and Empty Tokyo.
• Californians Overwhelmingly Favor Pension Limits. California voters support limits on public-employee pensions by a 3-to-1 margin, according to the Field Poll.
• Iran Will Respond With "All Power and Potentials at Its Disposal to Halt The Oppression of the People of Bahrain".
  

Zero Hedge:

• Libya Threatens Counterstrike Against Civilians, Mediterranean Traffic , If Attacked as UN Set to Vote On Air Strikes at 6pm.
• US, UK Pull Search Teams Out of Japan as TEPCO Admits Situation is "Severe".
  

New York Post:

• Radioactive Fliers Land in US. Two flights that originated in Tokyo and landed in Dallas and Chicago yesterday triggered radiation detectors when passengers passed through customs, The Post has learned. Tests on the jet that landed at the Dallas-Fort Worth airport showed low levels of radiation on the travelers' luggage and inside the cabin's filtration system.

LA Times:

• Small Amounts of Radiation Headed for California, But No Health Risk Seen. Very low levels of radioactive isotopes from the damaged Japanese nuclear plant are expected to reach California as soon as Friday, but experts say the amount will be well within safe limits. A network of radiation monitors is keeping close watch.
• Shortage of Japanese Parts Shuts GM(GM) Truck Factory. General Motors said Thursday that it will suspend production of Chevrolet Colorado and GMC Canyon pickup trucks at a factory in Shreveport, La., for at least a week starting Monday because of a shortage of parts coming from Japan. About 900 employees work at the plant.

Politico:

• Paul Ryan: President Obama 'Punting' on Budget. Rep. Paul Ryan (R-Wis.) accused Barack Obama of “punting” on the budget debate Thursday, saying the president is “ignoring the problem.” The House Budget Committee chairman said he has “never discussed” budgetary issues with Obama — the last time the two talked one-on-one was during a congratulatory phone call the president made after the November elections, when Republicans swept the lower chamber.
• Dems Wonder: What's Our Plan? Democrats in Congress are grappling with a question as they negotiate a spending deal: Who's in charge?
  

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 21% 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 -20 (see trends).

Valor:

• The U.S. Export-Import Bank plans to provide a loan of $1 billion for deep-water oil exploration in Brazil. The bank will also help finance Brazilian infrastructure projects for the 2014 World Cup and 2016 Olympics. The bank plans to announce the loans during President Obama's visit to Brazil this week.

Globe and Mail:

• RIM's(RIMM) Messenger Remedy Not Satisfactory, India Says. Indian security agencies are not satisfied with a plan offered by Research In Motion for them to have access to data on its BlackBerry Messenger services, junior Telecoms Minister Sachin Pilot told parliament Wednesday. RIM gave India access to its consumer services, including its Messenger services, in January after Indian authorities raised security concerns, but said it could not allow monitoring of its enterprise e-mail.

DigiTimes:

• PC Supply Chain Still Has Up to 3 Months of Inventory, Says Acer Taiwan President. Acer Taiwan president Scott Lin has pointed out that the PC industry's upstream supply chain still has an inventory level of about 2.5-3 months, and therefore will only see limited impact from Japan's earthquake; however, since some PC players are rushing to stockpile more inventory, causing the price of DRAM and panels to rise, players will see their component costs increase in the short term. As for the damage to the supply of silicon wafers and panel conductive adhesives from Japan, since the two components are already showing signs of shortages, Acer is monitoring their supply status and will take measures when needed. Since retail channels still have about one month of inventory, while brand vendors and upstream OEM players each have about one month of inventory, the PC supply chain should not have any problems within the next 2.5-3 months. As for long term, restoring Japan's power system will be key to whether the shortage problems expand, Lin noted.

ICIS.com:

• Japan Disaster: Tokyo Staff Told to Leave Offices on Blackout Fears. Staff from several petrochemical-related firms have been told to vacate their offices on fears of a possible large-scale blackout in Tokyo and its surrounding areas on Thursday night, company sources told ICIS. Demand on Thursday morning had almost reached the available capacity of Tokyo Electric Power Co (TEPCO), trade minister Banri Kaieda said, according to Reuters. Electricity demand usually peaks in the evening or early night, Kaieda added. The 9.0-magnitude earthquake and tsunami, which hit Japan’s northeast on 11 March, damaged TEPCO’s Daiichi nuclear facility, forcing disruptions for industrial operations and a cut in electricity supplies across the northern region of the country. TEPCO earlier this week said that it may impose a rolling blackout during an upcoming three-day weekend for Tokyo and the nine prefectures it serves. A source from Mitsubishi Corp said wide scale blackout is possible on Thursday night as electricity consumption in the city is almost at breaking point.

Jiji:

• Four ethylene plants in eastern Japan were halted because of the March 11 earthquake, citing Kyohei Takahashi, chairman of the Japan Petrochemical Industry Association. The plant shutdowns in Kashima, Chiba and Kawasaki will reduce the country's output of ethylene by 25%.

Shanghai Daily:

• Lenovo Warns About Battery Shortage. LENOVO, the world's No. 4 personal computer brand, joined a growing list of companies in several industries warning of disruptions to their production in the medium term, as stocks of components such as batteries dwindle. "In the short term there won't be much impact. We are more worried about the impact in the next quarter," Lenovo Chief Executive Yang Yuanqing said in Shanghai yesterday.The supply of batteries for notebook PCs ... could come under pressure, as key suppliers such as Sony Corp have shut down factories in Japan, said Michael Clendenin, managing director of RedTechAdvisors, a Shanghai-based firm. "Sony and Sanyo would be two of the key suppliers, and Sony has essentially shut down five or six of its factories in Japan," Clendenin said.

Caixin:

• China's consumer price index growth may rise 5.5% in April, citing an official at the People's Bank of China.

Bear Radar

Style Underperformer:

• Small-Cap Growth (+.40%)

Sector Underperformers:

• 1) Airlines -1.56% 2) Hospitals -.55% 3) Networking -.05%

Stocks Falling on Unusual Volume:

• MLHR, KNL, SWH, AEP, ETR, RNR, SHLD, TRGL, CCJ, KWK, TLK, LULU, PEGA, SANM, CBPO, TRGT, JAZZ, OCLR, FNSR, SINA, CPLA, HOLI, OPLK, SWKS, WBSN, JDSU, SOHU, SCO, ATU, NRP, GES and WGO
  

Stocks With Unusual Put Option Activity:

• 1) MHS 2) FXY 3) MDY 4) ALL 5) CCJ
  

Stocks With Most Negative News Mentions:

• 1) ANN 2) DVN 3) BMC 4) MEE 5) AEO

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth (+1.76%)

Sector Outperformers:

• 1) Road & Rail +3.44% 2) Oil Service +3.22% 3) Wireless +2.67%

Stocks Rising on Unusual Volume:

• ALJ, SI, CLF, BBL, TOT, GLNG, PANL, CREE, ESRX, AKAM, QCOM, DIOD, GTLS, EWJ, WWWW, FDX, BSFT, HNR, CSX, EWG, BTU, HRS, BWC, EFA, EWD, QLD and HGG
  

Stocks With Unusual Call Option Activity:

• 1) BIG 2) CREE 3) MNKD 4) LVLT 5) USU
  

Stocks With Most Positive News Mentions:

• 1) DIOD 2) PH 3) AKAM 4) CMA 5) MGM

Charts:

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

Stocks Falling into Final Hour on Rising Energy Prices, Japan Nuclear Fears, Technical Selling, Mideast Unrest

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Heavy
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 27.59 +13.77%
  
• ISE Sentiment Index 63.0 -32.98%
  
• Total Put/Call 1.23 +11.82%
  
• NYSE Arms 2.37 +95.34%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.40 +1.38%
  
• European Financial Sector CDS Index 115.32 -2.45%
  
• Western Europe Sovereign Debt CDS Index 174.33 bps -.76%
  
• Emerging Market CDS Index 224.43 +2.22%
  
• 2-Year Swap Spread 20.0 +1 bp
  
• TED Spread 22.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 264.0 -7 bps
  
• China Import Iron Ore Spot $163.60/Metric Tonne -.67%
  
• Citi US Economic Surprise Index +60.20 -2.4 points
  
• 10-Year TIPS Spread 2.38% -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -403 open in Japan
• DAX Futures: Indicating -28 open in Germany

Portfolio:

• Lower: On losses in my Tech, Retail and Medical longs
  
• Disclosed Trades: Added (IWM)/(QQQQ) hedges and added to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 erases gains for the year. On the positive side, Coal and Ag shares are higher on the day. Small-caps and cyclicals are outperforming. Copper is rising +1.48%. The 10-year yield is declining -10 bps to 3.20%. The Spain sovereign cds is falling -4.84% to 227.21 bps, the Japan sovereign cds is falling -4.75% to 113.18 bps, the Belgium sovereign cds is falling -4.51% to 147.80 bps and the Asia Pacific sovereign cds index is dropping -5.59% to 120.47 bps. Moreover, the US Muni CDS Index is falling -3.55% to 153.72 bps. On the negative side, Airline, Education, Construction, Drug, I-Banking, Wireless, Computer Services, Disk Drive, Semi, Computer, Software, Steel, Oil Service and Energy shares are under significant pressure, falling more than 2.0%. Tech shares continue to underperform. China Iron Ore Spot has declined -14.4% in about 1 month. The avg. US price for a gallon of gas is -.01/gallon today to $3.55/gallon. It is up .43/gallon in 29 days. The fact that oil is rising +.99% today with such equity market weakness and a falling euro is also a negative. Some key market leaders are finally rolling over today. As well, the market is reacting poorly to known news, which is always a red flag. I suspect that global growth is slowing more than economists perceive right now. News that Shanghai's exports to the European Union shed 25.4 percent annually to US$2.1 billion last month is a red flag for global growth. I expect US stocks to trade mixed-to-lower into the close from current levels on Japan nuclear fears, global growth worries, rising energy prices, Mideast unrest, technical selling and more shorting.