Wednesday Watch

Evening Headlines
Bloomberg:

• Allies Target Qaddafi Ground Forces, Debate Command Structure. The U.S.-led alliance is preparing to direct more attacks against leader Muammar Qaddafi’s ground forces as the U.S. and its partners try to resolve disputes over who will take over command. The initial wave of allied airstrikes, concentrated on Libya’s air defenses, have not ended attacks on civilians by Qaddafi’s fighters, said U.S. Admiral Samuel Locklear, the tactical commander for the allied attacks on Libya. The alliance now is “considering all options” for using air power to protect civilians in battleground cities of Misrata, Ajdabiya and Zawiyah, said Locklear, who spoke to reporters at the Pentagon via telephone from his command ship in the Mediterranean Sea. In Brussels, members of the North Atlantic Treaty Organization held a second day of inconclusive talks about whether it or some ad-hoc grouping will take command of military operation initially headed by the U.S. There are division within NATO and also a need to include Arab participants in the leadership. President Barack Obama spoke with both U.K. Prime Minister David Cameron and French President Nicolas Sarkozy yesterday to try to resolve the issues, according to statements from their offices. “This command-and-control business is complicated, and we haven’t done something like this kind of on-the-fly before,” U.S. Defense Secretary Robert Gates told reporters in Moscow yesterday.
• Oil Near Two-Week High in New York on Libyan Conflict, Middle east Turmoil. Oil traded near a two-week high in New York amid concern that continued conflict in Libya threatens to prolong supply disruptions and that escalating turmoil may curtail Middle East shipments. May futures climbed 1.8 percent yesterday as U.S. Admiral Samuel Locklear said further strikes will be launched against ground forces of Libyan leader Muammar Qaddafi in the “coming hours and days.” Prices have advanced 15 percent this year as turmoil that toppled the leaders of Tunisia and Egypt spread to Yemen, Bahrain and Syria. “Events in the Middle East and North Africa are the main game in the crude oil market and are the thing to watch in terms of the direction of the oil price,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, told Susan Li on Bloomberg Television’s “First Up.”
  
• Nuclear Cleanup Faces Power Test as Quakes Rattle Fukushima. Early morning earthquakes rattled Japan’s crippled nuclear plant as engineers restored lighting at a control room and endeavored to connect power cables needed to cool the reactors. Four quakes of 5-magnitude or greater struck eastern Honshu, Japan, within an hour starting at 7:12 a.m. local time, according to the U.S. Geological Survey website. There was no impact on the Fukushima Dai-Ichi plant itself, the Japan Nuclear and Industrial Safety Agency said in a statement. Restoring power is key to ending the crisis at four unstable reactors that have leaked radiation into the ocean and forced the government to evacuate thousands of local residents. Plant operator Tokyo Electric Power Co. has been battling to prevent a meltdown at the plant after losing electricity that helps circulate cooling water to the units following the March 11 temblor and tsunami. Lights are on in the control room at the No. 3 reactor and there is some lighting working at No. 4, the company said today. Reactors No. 5 and 6 are already supplied with electricity. “They’ve made considerable progress bringing equipment to the plant and restoring power,” David Lochbaum, director of nuclear safety at the Cambridge, Massachusetts-based Union of Concerned Scientists, said on a conference call with reporters. “But they’re not out of the woods yet. They are working with razor-thin margins.”
• Euro Drops for Second Day Ahead of EU Summit on Debt, Portugal Budget Vote. The euro declined for a second day against the dollar on concern European Union leaders meeting this week will struggle to find a permanent solution to the region’s fiscal crisis. The single currency weakened versus 13 of its 16 major counterparts on speculation Portugal’s parliament will collapse today as the parliament votes on budget cuts that have divided lawmakers. The pound climbed for a third day against the euro before the Bank of England releases minutes of this month’s policy meeting. “European countries will have to restructure their finances, causing demand to weaken in their economies,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd., Japan’s second-largest publicly traded lender. “This weighs on the euro.” The euro fell to $1.4168 as of 9:49 a.m. in Tokyo from $1.4196 in New York yesterday, when it weakened 0.2 percent. European Union leaders are discussing ways to work out a solution to the region’s credit woes in time for a March 24-25 summit. “There seem to be market worries that Portugal may not approve fiscal austerity measures,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “This could lead to euro weakness.”
• Bank of Spain Underestimates Funding Gap Faced by Lenders, Idealista Says. Spanish lenders face a capital shortfall that’s “substantially” higher than an estimate by the Bank of Spain because they haven’t accounted for all of their real-estate losses, according to Jesus Encinar, founder and chief executive officer of Idealista.com. As much as 15.2 billion euros ($21 billion) is needed by Spanish banks to meet new capital requirements, the central bank said on March 10. Encinar, 40, said the eventual shortfall may be between 80 billion euros and 100 billion euros. A spokesman for the Bank of Spain declined to comment on his estimate. “Property portfolios are still mostly valued at prices dating from the boom, rather than current values,” Encinar said during an interview at his office in Madrid. Home prices in some parts of Spain have dropped about 40 percent since the market’s peak in 2007, according to his 10-year-old company, the country’s largest property website. Savings banks alone have taken on land worth 23 billion euros after borrowers defaulted on their loans, according to data from the Bank of Spain. Land prices have fallen as much as 80 percent in the past four years and the valuations used by lenders are “pure fantasy,” Encinar said. Moody’s Investors Service cut its credit rating for Spain to Aa2 before the Bank of Spain’s announcement. Lenders may need as much as 50 billion euros to comply with the new balance-sheet rules, the ratings company said. Silvio Peruzzo, an economist at Royal Bank of Scotland Group Plc (RBS) in London, estimates the shortfall is about 52 billion euros. Banks and other financial-services companies advertise homes at prices that are as much as 12 percent higher than privately owned properties, according to Idealista. In return, they offer better mortgage terms, Encinar said. In some cases, banks only grant mortgages for homes that they own. “We tried to inform the banks about the market value of their properties, but they won’t reduce prices because it would affect the data that the banks are giving to the Bank of Spain,” he said. An increase in interest rates would make the situation even worse for lenders, he said. This could lead to more foreclosed homes that banks will have to take onto their balance sheets on top of the “second wave” of property and land assets handed over by developers that can no longer refinance debt. Spanish homeowners are particularly vulnerable to rate rises because 97 percent of outstanding mortgages have variable interest rates, according to the Spanish Mortgage Association. “If the banks, the government and the Bank of Spain were more realistic, they would help to restore confidence,” Encinar said. “Until then, all we can do is plaster over the problem.”
• Yemeni Women Hold Vigil as Military Defections from Saleh's Regime Mount. Thousands of Yemeni women carrying candles held a vigil in central Sana’a last night to mark the killing of dozens of people by government forces as military commanders defected and stood with the protesters.
• U.S. Halts Imports of Milk, Produce From Four Japan Prefectures. Milk and fresh produce from four regions of Japan closest to radiation leaks from a damaged nuclear power plant will be barred from the U.S. as regulators step up safeguards against potential food contamination. The products from the Fukushima, Ibaraki, Tochigi and Gunma prefectures in Japan are affected by the Import Alert issued yesterday by the Food and Drug Administration. Food believed to be from these areas will be detained at the U.S. border unless the importer can verify the products came from other regions of Japan, the FDA said in an e-mailed statement yesterday. The agency has assured U.S. consumers it was taking action such as using radiation tests to protect against food contaminated from Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant, which has leaked radiation into vegetables and seawater.
• Japan's taxpayer, not the nuclear industry, will cover most of the cleanup cost from the worst accident since Chernobyl, a financial rescue that may spur moves by other nations to make companies assume more liability. Tokyo Electric Power Co., in its 13th day fighting to avert a meltdown at its Fukushima plant 135 miles north of Tokyo, at most is required to cover third-party damages of $2.1 billion under Japanese law. Should the government declare the magnitude-9 earthquake and tsunami that flooded its reactors an "exceptional" act of God, the utility may be off the hook in paying compensation that may be demanded by injured workers, farmers and shareholders.
• Fukushima Engineer Says He Covered Up Flaw at Shut Reactor. One of the reactors in the crippled Fukushima nuclear plant may have been relying on flawed steel to hold the radiation in its core, according to an engineer who helped build its containment vessel four decades ago.
• Adobe Systems(ADBE) Forecast Misses Estimates as Japanese Sales Slow After Quake. Adobe Systems Inc. (ADBE), the largest maker of graphic-design software, forecast second-quarter profit that fell short of analysts’ estimates as the earthquake and tsunami in Japan cut into sales. Profit excluding some costs will be 47 cents to 54 cents a share in the current quarter, Adobe said today in a statement. That compared with the 56-cent average of analysts’ projections compiled by Bloomberg. Revenue will be $970 million to $1.02 billion, Adobe said. Analysts estimated sales of $1.04 billion.
• Fed's Fisher Says Companies Want to Raise Prices, WSJ Reports. Federal Reserve Bank of Dallas President Richard W. Fisher said each of the roughly 50 business executives he speaks with on a regular basis is looking to price goods or services “more aggressively” as costs rise, according to the Wall Street Journal. “That concerns me,” he said in an interview with the newspaper today in Frankfurt. “You’re beginning to hear numbers in the 3 percent-plus level.” The regional bank chief said he personally surveys about 50 businesses, more than most of his colleagues at the Fed, and that the position on prices is “without exception, in every sector in every size, whether they’re public or private.” “We have to use a term that the great hockey player Wayne Gretzky used: we have to skate ahead of the puck,” Fisher said.

Wall Street Journal:

• In Tripoli, Fear and Despair Mount. Four days into foreign strikes against Col. Moammar Gadhafi's military, some residents of Libya's largest city expressed fear and a weary exasperation, with some venturing to say their leader must go. "The regime must be bad if it brought us to this stage," said one Tripoli resident, Mohammed, referring to the airstrikes. "If we have gotten this far, then there is no going back."
• Banks Hit for Credit Union Ills. Federal regulators are blaming Wall Street's biggest firms for the collapse of five institutions at the heart of the nation's credit-union industry and are seeking to recoup tens of billions of dollars in losses on securities that doomed the five.
• Public Pension-Fund Squeeze. It Is Actuaries vs. Local Governments Over Return Rates; 'We Cannot Afford This'.
• UAW Sets New Tactic to Organize at Foreign Car Makers. The United Auto Workers outlined a new push to recruit U.S. workers at one or more foreign auto makers and will bolster the effort by training and sending activists abroad to organize rallies and protests in support of the union campaign. On Tuesday, UAW leaders meeting here described plans to reach out to foreign unions and consumers in what would be their first major campaign since failed efforts in the last decade at Nissan Motor Co. and auto-parts supplier Denso Corp.
• ObamaCare and Carey's Heart. My daughter probably wouldn't have survived in a system where bureaucrats stifle innovation and ration care. Today is the first anniversary of the greatest single assault on our freedom in my lifetime: the signing of ObamaCare. As we consider what this law may do to our country, I can't help but reflect on a medical miracle made possible by the American health-care system. It's one that holds special meaning for me.

MarketWatch:

• China's Freewheeling Market for Stem Cells. Weak regulation lets hospitals sell untested stem-cell transplants.

CNBC:

• $120 Oil: The Breaking Point for Consumers?

Business Insider:

• Clair McCaskill Has A Plane Problem, And It Could Hurt The Dems. U.S. Sen. Claire McCaskill's (D-MO) airplane trouble don't seem to be going away and Dems are justifiably nervous the scandal could ruin any chance they have at holding on to the Show Me State seat in 2012. Just how bad is the "Air Claire" problem? Here's a recap:

Zero Hedge:

• Citi(C) Recommends Buying Irish CDS In Advance of "Nightmare on Kildare Street".
• As Buffett Talks Down Japanese Devastation, His Munich Re Announces Massive Loss, Forecast Miss Due to Earthquake. If one was merely listening to the Octogenarian of Omaha this morning on CNBC, one could easily have left the latest cheerleading attempt by the man who has made both an art and a science of frontrunning the government's rescues of the most incompetent and insolvent organizations in America (and later writing oped's both thanking and criticizing Uncle Sam for doing everything possible to transfer as much taxpayer money into Warren's right pocket just before the hypocrisy medication kicks in) to hypnotize the lemmings into believing all is fine in Japan.

New York Times:

• Goldman(GS) Chief Expected to Testify at Galleon Trial. The government said late Tuesday that it intended to call Lloyd C. Blankfein, the chief executive of Goldman Sachs, as a witness in the insider-trading trial of Raj Rajaratnam, the Galleon Group hedge fund manager.

Forbes:

• Will the Research in Motion(RIMM) PlayBook Be D.O.A.

CNN Money:

• LIBYA: How Will We Pay For It? The tab to enforce a no-fly zone is adding up. Some experts say it will reach $800 million or more.
• Libyan Civil War: An Opening for al Qaeda and Jihad?
  

The Sacramento Bee:

• California Governor Jerry Brown Considering Initiative on Taxes. Gov. Jerry Brown is considering a November ballot initiative to extend tax increases and may announce it as early as this week, bypassing Republican opposition in the Legislature, a source said.

Detroit Free Press:

• Census 2010: Detroit Population Plummets 25% to 713,777, Lowest Since 1910. Detroit’s population plunged 25% in the past decade to 713,777, the lowest count since 1910, four years before Henry Ford offered $5 a day to autoworkers, sparking a boom that quadrupled Detroit’s size in the first half of the 20th Century. Census figures released to the Free Press by a government source who asked not to be identified because the data has not been released publicly yet, show the city lost, on average, one resident every 22 minutes between 2001 and 2010. The data also show that Wayne County’s population fell almost 12% to 1,820,584. Oakland County grew almost 1% to 1,202,362, while Macomb grew the most, a 6.7% increase to 840,978. Macomb is now more populous than Detroit for the first time. Detroit’s political clout in the state also stands at a level not seen since 1880. Just 7.1% of Michiganders live in Detroit now, down from a peak of 32.4% in 1930. Detroit, once America’s fourth most populous city, will fall below Midwestern neighbors like Columbus, Ohio and Indianapolis, Ind. as well as southern cities like Jacksonville, Fla., Charlotte, N.C., and Austin and Fort Worth, Texas. Fueled by the implosion of the domestic auto industry, the Motor City’s 238,270-resident decline helped make Michigan the only state to experience a net population loss since 2000. Overall, the state’s population fell by about 54,000 people, a 0.6% decline at a time when the nation’s population grew about 9.7%.

Politico:

• Barack Obama: Libyan Air Campaign Could Last. President Barack Obama acknowledged Tuesday that the joint military operation under way in Libya to protect civilians could continue as long Col. Muammar Qadhafi remains in control in Tripoli.

USA Today:

• Damage to Japan's Economy May Be Worse Than Thought. Japan’s earthquake, tsunami and nuclear crisis could deliver a bigger blow to that nation’s economy and U.S. manufacturers than originally estimated, some economists say, due to extended disruptions to Japan’s power grid and factory supply chains. Some large U.S. electronics makers likely will shut down due to the temporary loss of components from Japanese suppliers, says Paul Martyn, vice president of consulting firm BravoSolution. Unlike steel or auto parts, electronics are tightly linked, and makers can’t easily shift to new suppliers, he says. IHS Global Insight expects this week to raise its estimate of the disaster’s toll on Japan’s economy. Simona Mocuta, who heads IHS’ Asia Pacific group, says the firm’s estimate of the decline in Japan’s economic output this year could widen to 0.5% from 0.2% because of rolling blackouts that could extend into summer. Japan’s growth could hit a low of 0.4% in the second quarter, based on the median forecast of nine economists in a Bloomberg News survey. But Julian Jessop of Capital Economics predicts Japan’s economy will shrink by 2% in the first quarter and 4% in the second. “We suspect the consensus is giving far too little weight to the blow to confidence and activity from the nuclear crisis,” he says.

Reuters:

• Teck Cuts 2011 Coal, Copper Sales View.
• Emerging Market 2010 Debt Volumes Hit Record - EMTA.
  

Telegraph:

• Federal Reserve Official: 'We've Done a Bit Too Much' QE. Richard Fisher, who heads the Dallas branch of the Fed, said that the world's biggest economy is no longer in need of further stimulus and the real question is when to begin tightening monetary policy. To embark on a third round of quantitative easing (QE) would "only prolong the injustice inflicted" on savers through inflation, Mr Fisher said. Mr Fisher, who become a voting member of the Fed's rate-setting committee this year, said in a speech in Frankfurt that "there's lots of liquidity sloshing around the US financial system. We are seeing signs of all the intoxication that typically takes place when we have the ambrosia of cheap and readily available capital."

Nikkei:

• Tokyo's power supply may fall 25%, or 15 million kilowatts, short of demand this summer.

Kyodo News:

• Japanese Prime Minister Naoto Kan asked Ibaraki Prefecture Governor Masaru Hashimoto to halt shipments of milk and parsley from the region.
• The temperature in the lower part of a pressure vessel of the No.1 reactor at Tokyo Electric Power Co.'s Fukushima Dai-Ichi nuclear plant was 399 degrees Celsius as of midnight on March 23, citing Japan's Nuclear and Industrial Safety Agency. That's higher than the reactor's normal operating temperature.
• Japan's government ordered six more prefectures to perform radiation checks of agricultural products, citing the nation's health ministry. Prefectural authorities of Miyagi, Yamagata, Saitama, Chiba, Niigata and Nagano were told to do the checks.
  

Dong-A Ilbo:

• The U.S. has turned down North Korea's proposal for bilateral talks, citing a diplomat. North Korea has asked the U.S. on at least two occasions since late last year to hold talks in Geneva.

China Daily:

• Ads Promoting Wealthy Good, Lifestyles Banned. Advertisements that promote products as luxurious or "high-end" have been banned in a move experts say is designed to protect social harmony. The clean up means commercials posted or aired in public can no longer include words like "supreme", "royal", "luxury" or "high class", all of which frequently appear in Chinese promotions for real estate developments, vehicles and wines. According to a March 17 press release issued by the Beijing Administration for Industry and Commerce, officials will target advertisements that "promote hedonism" or "the worship of foreign-made products". Peking University sociologist Xia Xueluan agrees with the move. He told METRO: "We need to regulate the use of such words and catchphrases, as they can have an adverse impact on the whole society." He said many advertisements promote the belief that "wealth is dignity" and can even upset low-income residents. Wang Yong, who works at a State-owned company in Beijing, said that when he was looking for a new apartment, he noticed many real estate promotions used words like "royal" and "luxury". The legislation also targets the "abuse of idioms" in commercials, which is a recent phenomenon, said Mu Haifeng, the city's deputy director of advertisement management.

Oriental Morning Post:

• Standard Chartered Plc, Citibank and some other overseas banks in China have stopped giving home equity loans to individuals because of year-end limits on loans to 75% of deposits. Other lending restrictions are also affecting the ability of foreign banks to extend loans.

21st Century Business Herald:

• Some Chinese provinces have lowered their economic growth targets for the next five years after the central government called for more obtainable targets.

Financial News:

• Deputy Chinese central bank governor Du Jinfju said maintaining stable prices is a priority for the nation's economic policy.

Haaretz:

• Syria Security Forces Kill 6 in Attack on Daraa Mosque, Witnesses Say. Among victims is a doctor from a prominent Daraa family who arrived at the protest hub to help victims of the attack. Syrian forces killed at least six people on Wednesday in an attack on the Omari mosque in the southern city of Daraa, site of six days of unprecedented protests challenging Baath Party rule, residents said.

Evening Recommendations
Citigroup:

• Reiterated Buy on (GT), boosted estimates, raised target to $21.

Night Trading

• Asian equity indices are -.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 117.0 +2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 117.0 unch.
  
• S&P 500 futures -.16%.
  
• NASDAQ 100 futures -.24%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GIS)/.56
• (FUL)/.32
• (PAYX)/.35
• (SCS)/.08
• (KBH)/-.30
• (RHT)/.22
• (MU)/.00
  

Economic Releases
10:00 am EST

• New Home Sales for February are estimated to rise to 290K versus 284K in January.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +1,745,000 barrel gain the prior week. Distillate supplies are expected to fall by -1,500,000 barrels versus a -2,601,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -2,000,000 barrels versus a -4,174,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by +.4% versus a +1.4% gain the prior week.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, weekly MBA mortgage applications report, (COP) analyst meeting, (AMAT) analyst meeting, (SRE) analyst conference and the (CAT) analyst meeting could also impact trading today.
  

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

Stocks Slightly Lower into Final Hour on Rising Energy Prices, Eurozone Debt Angst, Mideast Unrest, Japan Worries

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 20.16 -2.18%
  
• ISE Sentiment Index 128.0 -1.54%
  
• Total Put/Call .78 +4.0%
  
• NYSE Arms 1.38 -13.76%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 96.51 +.77%
  
• European Financial Sector CDS Index 103.97 +2.40%
  
• Western Europe Sovereign Debt CDS Index 168.08 bps +2.13%
  
• Emerging Market CDS Index 213.70 -3.50%
  
• 2-Year Swap Spread 20.0 unch.
  
• TED Spread 22.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .09% +2 bps
  
• Yield Curve 268.0 -1 bp
  
• China Import Iron Ore Spot $164.40/Metric Tonne +.37%
  
• Citi US Economic Surprise Index +61.0 -.6 point
  
• 10-Year TIPS Spread 2.39% -6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -108 open in Japan
• DAX Futures: Indicating +20 open in Germany

Portfolio:

• Slightly Higher: On gains in my Biotech/Medical longs and ETF hedges
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades just slightly lower, despite rising energy prices, growing Mideast unrest, Japan concerns and rising eurozone debt angst. On the positive side, Education, Drug, Telecom, Computer Serivice, Steel, Oil Tanker, Coal and Utility shares are higher on the day. Copper is gaining +.62%. The Japan sovereign cds is falling another -7.07% to 98.92 bps, which is a major positive. On the negative side, Airline, Road & Rail, Gaming, Retail, REIT, Networking, Disk Drive and Semi shares are under meaningful pressure, falling more than 1.0%. Small-caps and cyclicals are relatively weak. (IYR) has underperformed throughout the day. Tech is also underperforming again. Oil is rising +2.02% and lumber is falling -3.09%. The avg. US price for a gallon of gas is unch. today at $3.55/gallon. It is up .43/gallon in 35 days. The Portugal sovereign cds is climbing +2.63% to 531.55 bps, the Greece sovereign cds is surging +3.3% to 993.43 bps and the Ireland sovereign cds is gaining +5.11% to 616.17 bps. The Citi Eurozone Economic Surprise Index is falling again to -12.80 today and is now at the lowest since March 23rd of last year. The Portugal and Ireland credit default swaps are very close to breaking out technically. The US dollar continues to trade poorly, however I suspect a reversal higher is in the offing over the coming days. The Networking subsector of tech, which had been a market leader, remains heavy. The market's resilience in the face of numerous mounting headwinds remains very impressive. The S&P 500 is still right near its 50-day moving average. If the benchmark can break convincingly above this level I will further add market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on growing Mideast unrest, rising energy prices, rising eurozone debt angst, Japan concerns, more shorting, profit-taking and technical selling.

Today's Headlines

Bloomberg:

• Irish, Portuguese Bonds Sink on Debt Concern; Euro Falls. Irish notes slid, leading bonds of Europe’s most indebted nations lower, and the euro fell on concern Europe is struggling to fix its government-finance crisis. Irish 2-year note yields surged 63 basis points to 9.87 percent and rose as high as 10.18 percent, the most since 2003. Yields on similar-maturity Portuguese and Greek debt climbed at least 18 basis points. The slump in Irish notes came after EU finance chiefs settled yesterday on how to enable a permanent rescue fund to lend 500 billion euros ($712 billion) as of 2013, while remaining divided over how to get the current stopgap fund to its full capacity. The Portuguese government forecast that the economy will contract this year as investment declines and it cuts spending to narrow the budget deficit. “The problems in the periphery have not lessened,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, said in a note to clients. “ The real immediate focus is on Portugal. The government’s new austerity measures will be debated tomorrow.” Ten-year Portuguese yields jumped 13 basis points to 7.50 percent, after retreating for two straight days, and the spread above benchmark German bund yields widened 10 basis points to 4.23 percentage points. Portugal’s government may collapse tomorrow as the country’s parliament votes on a plan for fiscal austerity measures, JPMorgan Chase & Co. economist Nicola Mai said in a note e-mailed to investors. Credit-default swaps protecting Irish government debt rose 40.1 basis points to 628.8 basis points, according to data provider CMA, and the yield on the 10-year note surged 24 basis points to 9.84 percent. Europe’s efforts to tackle its sovereign debt crisis aren’t persuading money managers to buy bonds from the region’s most indebted nations. Work toward a solution to the region’s credit woes is scheduled to culminate at a March 24-25 summit of European leaders.
• U.S. Says Libyan Campaign to Ease as No-Fly Zone Secured. U.S. Defense Secretary Robert Gates said the intensity of the military campaign in Libya will ease soon after allied forces imposed a no-fly zone on Muammar Qaddafi’s regime, enabling rebels to push out of their eastern Benghazi stronghold. The fighting “should recede in the next few days,” Gates said at a press conference in Moscow today. Opposition fighters advanced on the central gateway city of Ajdabiya, which is held by loyalist troops, according to the Associated Press. Qaddafi’s army units continued to shell the western, rebel-held city of Misrata for a second day, residents said.
• Crude Oil Futures Increase as Japan Reconstruction May Bolster Fuel Demand. Crude rose on speculation Japanese rebuilding efforts will bolster fuel consumption and as unrest spread in the Middle East and North Africa. Crude oil for April delivery increased $1.55, or 1.5 percent, to $103.88 a barrel at 12:38 p.m. on the New York Mercantile Exchange. April futures expire today. The more-active May oil contract advanced $1.33, or 1.3 percent, to $104.42. Brent oil for May settlement rose 83 cents, or 0.7 percent, to $115.79 a barrel on the London-based ICE Futures Europe exchange.
• U.S. Facing Loss of Key Ally Against Al-Qaeda Group in Yemen. President Barack Obama is on the verge of losing a key ally in the fight against al-Qaeda, as Yemeni President Ali Abdullah Saleh attempted today to set conditions for quitting in the face of a popular uprising and defections among his ruling elite. “It’s clear at this point that Saleh will have to step down,” Barbara Bodine, a former U.S. ambassador to Yemen, said in an interview yesterday. With the “mounting numbers of senior people in his administration resigning, we know it’s over. The terms of his departure, I think, are still being negotiated.” The March 18 killing of at least 46 protesters allegedly by police and pro-regime gunmen -- which drew condemnation from Obama and Secretary of State Hillary Clinton and prompted the defection of key military, tribal and government officials -- may well be the tipping point.
• Bad Weather Hampers Japan Aid Efforts For Thousands in Temporary Shelters. Freezing rain and snow is slowing Japan’s relief efforts in areas hardest hit by the record earthquake and tsunami 11 days ago as the government struggles to restore communications to cut-off towns and villages.
• Sony(SNE) Shuts More Plants in Japan, Toyota(TM) Extends Halts as Recession Looms. Sony Corp. (6758) shut five more plants and Toyota Motor Corp. (7203) extended production halts, 11 days after an earthquake and tsunami that’s bringing scores of Japanese factories to a standstill and threatening to spark a recession. Sony, Japan’s biggest exporter of consumer electronics, today suspended some work at five plants in the central and southern regions until March 31 because of trouble getting supplies after power outages, the Tokyo-based company said in a statement. Toyota, the world’s biggest carmaker, said all domestic car-assembly will be stopped until March 26, while Honda Motor Co. also extended closures. The moves come as Morgan Stanley estimated that damage to the earthquake-stricken northeast, including disruptions to power and distribution systems, may cause the world’s third- largest economy to shrink in the second quarter at an annualized rate of 6 percent to 12 percent. A recession is “almost certain,” according to Mizuho Securities Co. “Companies’ production and people’s consumption will be stuck in an abnormal state at least for the next six months,” said Naoki Iizuka, a senior economist at Mizuho Financial Group Inc. (8411) in Tokyo. “The electricity shortage will continue to hamper economic activity.”
• Hynix Semiconductor, the world's second-largest maker of computer-memory chips, said it is increasing orders for silicon wafers to preempt any possible shortage of the material following Japan's March 11 earthquake. Hynix has asked its suppliers to increase shipments of the components, Park Hyun, a spokesman for the Ichon, South-Korea-based company said. The semiconductor industry faces possible shortages of silicon after the March 11 earthquake and tsunami in Japan caused suspension of 25% of the global production of the material key to making chips, IHS iSuppli said.
• Walgreen(WAG) Declines as Profit Margin Falls Short of Expectations. Walgreen Co. (WAG), the largest U.S. drugstore chain, dropped the most since October 2008 in New York trading after profit margins failed to improve as some analysts anticipated. The shares fell $3.38, or 8.1 percent, to $38.59 at 9:52 a.m. in New York Stock Exchange composite trading, after earlier dropping as much as 8.4 percent.
• State and Local Tax to Rise to Keep Services, GAO's Offutt Says. States and localities will likely raise taxes to maintain health-care services, said the chief economist at the U.S. Government Accountability Office. The difference between what states and localities spend and what they take in will grow to about 2 percent of gross domestic product over the next 40 to 50 years without changes in spending and revenue policies, said Susan Offutt, whose department evaluates government activities for Congress. The growth will be driven by an increase in spending on health care, including Medicaid and payments to retirees, she said. “The nature of the fiscal problem is so daunting that to think about achieving reasonable debt-to-GDP ratios without tax increases of some kind is difficult,” she said today at the State and Municipal Finance Briefing hosted by Bloomberg Link in New York. Some 44 states face a collective budget gap of $112 billion for fiscal 2012, according to the Washington-based Center on Budget and Policy Priorities. Without spending and tax changes, the cumulative gap is likely to grow and states may have problems making payments, Offutt said.
• The U.S. spent at least $168 million hitting Libya's air defense systems with Raytheon Co. Tomahawk cruise missiles and North African nation, according to data compiled by Bloomberg.
• Rise in Officer Fatalities Called 'Unacceptable' by Holder. U.S. attorneys will meet with law enforcement officials around the country to devise ways to reduce an increasing and “unacceptable” number of fatal attacks on officers, Attorney General Eric Holder said. Holder made the comments at a meeting today with police officials at the Justice Department in Washington. Holder described the gathering as a “listening session” on officer safety. Following a two-year decline, law enforcement fatalities in 2010 increased to 162, from 117 the year before, according to preliminary data from the National Law Enforcement Officers Memorial Fund in Washington. There have been 49 deaths this year, up from 41 during the same period last year.

Wall Street Journal:

• Portugal Prime Minister May Step Down After Austerity Vote. The future of Portuguese Prime Minister Jose Socrates is in doubt, as rising political tensions over a fresh austerity drive may spark his resignation on Wednesday. Such a move could make it even more likely that the government would become the third in the euro zone to seek financial help from the European Union and the International Monetary Fund. Legislators will vote Wednesday on a series of new austerity measures that the government unveiled earlier this month. The main opposition parties plan to vote against those measures.

CNBC.com:

• France Could Extend Libya Operations Beyond Benghazi. France could extend its military operations over Libya beyond the Benghazi area from Wednesday, a spokesman for the French armed forces said on Tuesday.

Business Insider:

• CAUGHT ON TAPE: Former SEIU Official Reveals Secret Plan to Destroy JPMorgan(JPM), Crash the Stock Market, And Redistribute Wealth in America. A former official of one of the country's most-powerful unions, SEIU, has a secret plan to "destabilize" the country. The plan is designed to destroy JP Morgan, nuke the stock market, and weaken Wall Street's grip on power, thus creating the conditions necessary for a redistribution of wealth and a change in government. The former SEIU official, Stephen Lerner, spoke in a closed session at a Pace University forum last weekend. The Blaze procured what appears to be a tape of Lerner's remarks.
• 15 Companies That Will Get Slammed In An Asian Downturn.
• Insane Video of Qaddafi Tanks Firing Hundreds of Missiles.
• West Virginia Democrat Goes Rogue In Federal Budget Battle - Will Vote AGAINST Raising Debt Ceiling.
• Fed Chief Thomas Hoenig On Why The Fed Is Anti-Capitalistic and QE2 Was a Mistake.
• Egypt is Back. Interior Ministry on Fire in Cairo.
• CHART OF THE DAY: Hedge Funds Bought The Dip.
• If You Say "Protest" On A Phone In China, It Cuts Off Automatically.

Zero Hedge:

• OPEC Says Perfectly Happy With $120 Oil, Does Not Think It Will Impair Growth.
• Stratfor On Libya, The West and The Narrative of Democracy.
• Following Radioactive Rain, Radiation in Tokyo Jumps 10 Fold, Hitachinaka Iodine 131 Surges to 85,000 Becquerels.
  

LA Times:

• U.S. Fighter Jet Crashes in Libya; Crew Members Safe. The F-15E Strike Eagle crashed in northeast Libya after experiencing 'equipment malfunction,' a U.S. statement says. One crew member is rescued by an American search team and the other by Libyan rebels.

Detroit Free Press:

• General Motors(GM) Halts Some Production at N.Y. Plant. General Motors Co. is halting some production at its Buffalo, N.Y., engine plant because of a slowdown in parts from Japan. GM is also temporarily laying off 59 of the 623 workers at the Tonawanda Engine Plant. The workers make engines for a GM pickup factory in Shreveport, La., that is closed this week because of a shortage of parts from Japan. GM has also laid off 800 workers in Shreveport.

New York Fed:

• New York Federal Reserve Bank economists have launched Liberty Street Economics, a new blog.
  

Rasmussen Reports:

• Fewer Americans Than Ever Think U.S. Economy Will Be Stronger In Five Years.

Reuters:

• Verizon Wireless CEO Says No Interest in Sprint Deal. The chief executive of Verizon Wireless said he has no interest in buying Sprint Nextel Corp (S.N) even as the company stands to lose its top position in the U.S. wireless market because of a merger between AT&T Inc (T.N) and T-Mobile USA. Verizon Wireless CEO Daniel Mead also said he would not oppose AT&T's plans to buy Deutsche Telekom's (DTEGn.DE) T-Mobile USA for $39 billion. The CEO said the company did not want to be distracted from its goal of being the most profitable U.S. wireless operator.
• Fed Officials See U.S. Recovery Taking Hold. The U.S. recovery is gaining traction, two top Federal Reserve officials said on Tuesday, though they differed on the risks of inflation in the U.S. economy. Cleveland Fed President Sandra Pianalto said she expects the U.S. recovery to continue at a moderate pace, with rising commodity and energy prices only temporarily putting pressure on broader consumer prices.

Kyodo News:

• Radioactive iodine was found in the tap water of five areas in Japan's Fukushima prefecture, citing the nation's health ministry. The ministry said infants should not drink the water.
• Japan's health ministry detected radioactive material beyond legal limits in raw milk from Ibaraki prefecture, and broccoli and mustard spinach from Fukushima prefecture.
  

Bear Radar

Style Underperformer:

• Small-Cap Growth (-.67%)

Sector Underperformers:

• 1) Networking -1.65% 2) Airlines -1.24% 3) Disk Drives -1.16%

Stocks Falling on Unusual Volume:

• ARCC, NSANY, CMC, AGNC, ICFI, GPOR, KITD, FFIV, CHRW, EXPD, SSYS, CIEN, SHFL, ACOM, TWGP, RLOC, HAYN, HSFT, RCL, IVR, CCL, SSYS, WAG and GDOT
  

Stocks With Unusual Put Option Activity:

• 1) GGB 2) XLI 3) JBL 4) UTX 5) FTR
  

Stocks With Most Negative News Mentions:

• 1) NTCT 2) EXPD 3) LULU 4) HSP 5) MED

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value (-.11%)

Sector Outperformers:

• 1) Oil Tankers +1.06% 2) Tobacco +.96% 3) Education +.41%

Stocks Rising on Unusual Volume:

• KGC, GLNG, MCP, SSI, TZOO, HNR, STJ, EXPR, AHT and BJ
  

Stocks With Unusual Call Option Activity:

• 1) WAG 2) SRX 3) STJ 4) TLM 5) SO
  

Stocks With Most Positive News Mentions:

• 1) MRX 2) CEPH 3) HITK 4) BODY 5) CVG

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg:

• Allies' Control of Libyan Airspace Puts Qaddafi's Forces at Risk. Allied forces are expanding their air campaign over Libya in an effort to thwart Muammar Qaddafi’s fighters and enable rebels to control cities, such as opposition capital of Benghazi, that had been under attack by troops loyal to the regime.
• Yen Near Two-Week Low Versus Euro as Nuclear Crisis Eases, Stocks Advance. The yen was within 0.4 percent of a two-week low against the euro as Asian stocks rose and progress by Japan in restoring a crippled nuclear plant’s cooling systems reduced demand for the currency as a refuge. The euro was 0.1 percent from the strongest in four months against the dollar on speculation European Central Bank officials will reiterate this week their willingness to raise interest rates next month. The yen erased earlier losses against the greenback on concern Japanese investors are repatriating overseas assets. South Korea’s won rose on bets policy makers will allow the currency to strengthen to temper inflation. “The markets appear to be taking the view that the situation at the nuclear plant is stabilizing,” said Akira Hoshino, Tokyo-based chief manager of foreign-exchange trading at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest lender by market value. “Risk aversion may ease, which would likely be negative for the yen.” The yen traded at 115.14 per euro as of 12:08 p.m. in Tokyo from 115.26 in New York yesterday, after falling to 115.57 on March 18, the weakest since March 4. Japan’s currency was at 80.96 per dollar from 81.03, after earlier dropping 0.3 percent. The euro bought $1.4223 from $1.4226, after climbing to $1.4240 yesterday, the strongest since Nov. 5. The MSCI Asia Pacific Index of shares rose 1.6 percent and the Nikkei 225 (NKY) Stock Average surged 2.9 percent, as Japanese trading resumed after a holiday yesterday.
• Nuclear Plant's Fuel Rods Damaged, Leaking Into Sea. Tokyo Electric Power Co. said fuel rods at its Fukushima Dai-Ichi power plant have been damaged, releasing five kinds of radioactive material and contaminating seawater nearby. The acknowledgements from the utility indicate poisons emanating from the plant may be spreading through the air and sea, raising concern over the safety of seafood from the coast of northeastern Japan and agriculture in the region. The decay of radioactive fuel rods, composed of uranium and plutonium, was suspected by company officials five days after the March 11 magnitude-9 earthquake and tsunami off the main island of Honshu.
  
• Japan Economy V-Shaped Rebound Hangs on End to Blackouts. Japan is likely to see a rebound in the second half of this year after a blow that will be determined by the magnitude of electricity disruptions caused by the earthquake and tsunami, a survey of economists showed. Banks are split on whether the nation will slip into a recession, with Mizuho Securities Co. saying that’s “almost certain,” and Barclays Capital not seeing a single quarter of contraction. Annualized growth will trough at 0.4 percent in the second quarter, the median forecasts of nine economists surveyed by Bloomberg News show. “The hits to the electricity supply and extent of the hits to the supply chain are making it harder to analyze,” said Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs Group Inc. in Hong Kong, who previously worked at the International Monetary Fund. The longer it takes to restore electricity, the bigger the damage, he said.
• Bank of America's(BAC) Bad Loans Stalled U.S. Approval of Dividends, KBW Says. Bank of America Corp. (BAC), the biggest U.S. lender by assets, must resubmit plans for a dividend increase to the Federal Reserve because the regulator probably found fault with the firm’s capital, according to KBW Inc.
• Obesity Lap Bands May Cause More Complications Than Weight Loss. Almost half of patients undergoing gastric banding for obesity needed to have the device removed, often because of erosion, according to a study that found the treatment caused more complications than weight loss.
• Libyan Rebel Council Sets Up Oil Company to Replace Qaddafi's. Libyan rebels in Benghazi said they have created a new national oil company to replace the corporation controlled by leader Muammar Qaddafi and whose assets were frozen by the United Nations Security Council. The Transitional National Council released a statement announcing the decision taken in a March 19 meeting to establish the “Libyan Oil Company as supervisory authority on oil production and policies in the country, based temporarily in Benghazi, and the appointment of an interim director general” of the company. The Council also said it “designated the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and the appointment of a governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.”
• Wells Fargo(WFC) CEO Stumpf Says U.S. Limit on Debit-Card Fees 'Make No Sense'. Wells Fargo & Co. (WFC) Chief Executive Officer John Stumpf said limits on fees charged to merchants for debit-card transactions “make no sense” and distort free- market economics. “What’s next?” Stumpf, 57, wrote in his annual letter to shareholders of the San Francisco-based bank. “Will the government require car dealers to sell a new vehicle for $5,000 or grocers a gallon of milk for 50 cents?”
• Bristol-Myers(BMY) skin Cancer Drug Extends Survival in Trial. An experimental skin cancer drug being developed by Bristol-Myers Squibb Co. (BMY) boosted the survival of patients with advanced melanoma when combined with chemotherapy. A final-stage trial required for regulatory approval found that melanoma patients receiving Bristol-Myers’s drug ipilimumab and chemotherapy lived longer than patients who got chemotherapy alone, the New York-based company said in a statement today.
• KNOC Buys Texas Shale Stake From Anadarko(APC) for $1.55 Billion. Korea National Oil Corp. agreed to buy a stake in a Texas shale-oil block from Anadarko Petroleum Corp. for $1.55 billion, the second-largest purchase of U.S. oil and natural-gas fields this year, as Asian companies increase access to U.S. reserves.
• China Operations More Profitable as Climate Worsens, Amcham Says. More U.S. businesses in China said they were profitable last year even as they became increasingly pessimistic about the Chinese government’s commitment to improving market access, the American Chamber of Commerce in China said today. 24 percent of respondents said China’s economic reforms had done nothing to improve the environment for U.S. businesses in the country, up from 9 percent who said the same in the previous poll. The disconnect between performance and perception comes as U.S. companies, including Google Inc. (GOOG), say the Chinese government is making it increasingly difficult to do business in the world’s second-biggest economy.

Wall Street Journal:

• Allies Spar but Renew Airstrikes on Libya. The U.S. and its allies worked to expand the protective shield in the skies over Libya on Monday, while political skirmishing broke out over who would take command of the continuing international operation.
• Arab Regimes Under Siege. A contingent of Yemen's key military commanders defected to the political opposition Monday, the most significant challenge yet to the ability of the country's president, a U.S. ally against al Qaeda, to hold on to power. The development followed a bloody weekend crackdown on pro-democracy protesters that left dozens dead, as other countries in the region tipped toward instability. In Syria, residents of a town south of the capital demonstrated against the government for a fourth straight day, undeterred by protester deaths and the authoritarian regime's threats of crackdown.
• U.S. Reacts to Fear of Iran's Rising Clout. White House Eyes Islamist State While Strategizing in Libya, Bahrain, Yemen and Syria; But Its Approach Could Backfire.
• At Plant, Repair is Painstaking Task. Tokyo Electric Power Co. continued to report progress in restoring order at the Fukushima Daiichi nuclear reactors, but finishing the job is turning out to be a painstaking process plagued by damaged equipment and unexpected incidents. Smoke rose from two of the plant's six reactors Monday, forcing workers to retreat temporarily. The cause of the smoke wasn't immediately clear. Radioactivity returned to previous levels after a brief rise, officials said. "We aren't out of the crisis situation yet, but we are seeing a light at the end," said Prime Minister Naoto Kan.
• U.S. Banks Oppose Tighter Money Rules. Even as governments freeze assets tied to regimes in Libya, Egypt and Tunisia, U.S. banks are resisting efforts to tighten international rules to prevent the flow of money from corrupt politicians. U.S. banks are pushing back against a proposal by the FATF that would require financial institutions to identify the person who ultimately benefits from an account. The proposal would toughen the existing standards, which call on banks to take reasonable measures to identify the beneficial owner of an account. The strengthened requirements would force banks to "identify and take reasonable measures to verify the identity" of an individual who controls the account. While some countries such as Switzerland, already require that banks know the individual, U.S. banks generally allow accounts to be opened in the name of a trust, without mandated disclosure of the beneficiary. While the group includes banking-industry associations from around the world, people familiar with the matter said most of the opposition comes from U.S. banks, especially those with large trust operations.
• AT&T(T) Digs In for a D.C. Fight. With Deal to Buy Rival T-Mobile Sealed, Battle Now Moves to Washington.
• Reagan's Legacy and the Current Malaise by Steve Forbes. Lower taxes and a strong dollar could spur growth once again.

CNBC:

• China's Shrinking Labor Pool Creating 'Spoilt' Workers. "Mama Mia," the GM of an Italian company lamented to me over lunch in Shanghai, "The corruption I can deal with, but human resource issues are driving me insane. Workers are too short-term focused – 50 percent leave within two months no matter how much money and training we give."
• Warnings Signs Over Crony Capitalism in India. India and Russia are accustomed to being bracketed together as two of the world’s most promising high growth markets. But is there more to it than just being adjacent initials in the fabled BRICs acronym? Foreign investors are not alone in worrying this might be the case. Even as the country becomes one of the great economic growth stories of the 21st century, significant members of the Indian elite fear it may be following Russia in developing a kind of crony capitalism dominated by powerful insiders. A slew of recent corruption scandals – notably in telecommunications – has nourished anxieties that the combination of fantastic wealth creation and weak governance threatens to undermine India’s long-term success.

Business Insider:

• Shep Smith: Welcome to America's THIRD War. Shep Smith gave one of (what is quickly becoming his trademark) fiery asides today. This one was inspired by Adam Mullen's revelation on Meet the Press this Sunday that even if the Coalition is successful in its goal there is a possibility Qaddafi could stay in power in Libya. That was too much for Shep:
• Microsoft's(MSFT) Latest Legal Attack On Android Shows Desperation.
• Goldman Sachs(GS) Is Close to Making a "Meaningful Investment" in China That People Think Might Defy The Volcker Rule.
  

Zero Hedge:

• As BOJ Injects Fresh ¥2 Trillion, Radiation Measured 20 km Away From Fukushima Is 1,600 Times Normal. While Japanese futures briefly flirted with another advance, they subsequently dropped by 1% to 9,450, even despite the BOJ's latest injection of 2 trillion yen, which if it continues at this rate will surpass 100 trillion yen in injections within two weeks: an unprecedented feat, even by the Federal Reserve's standards. Of particular note weighing on the markets has been the news from Kyodo that, in confirmation of our fears that zones "Under Survey" are nothing but hotbeds of unprecedented radiation, reported radiation levels are 1,600 times higher than normal 20 kilometers from the power plant. Recall that the first evacuation radius was just 10 km. Assuming a power rate of declining fall out strength, means that the radiation within the 20 km diameter circle centered on Fukushina is currently hundreds of thousands to millions of time higher than normal.

IBD:

• DirecTV(DTV) Sees iPad as a Big Part of its Future.

Forbes:

• A Not-So-Happy Birthday for Obamacare. One year after the passage of the final version of ObamaCare, it's destabilizing insurance markets and government budgets in ways both foreseen and unexpected.
• California Tax Collectors Eye Buying Names Of Web Shoppers.
• It's Time To Curb Uncle Sam's Wasteful Spending Habits.
  

Pimco:

• Inflation Picking Up in Many Parts of the World.

Politico:

• Did Obama Lose Congress on Libya? President Barack Obama is facing growing anger from lawmakers who believe he overstepped his authority by launching missile strikes into Libya without first seeking the consent of Congress. The criticism is from all directions: from moderates, like Sens. Jim Webb (D-Va.) and Dick Lugar (R-Ind.); from those on the far left and right, like Reps. Dennis Kucinich (D-Ohio) and Ron Paul (R-Texas), who believe the president acted outside the Constitution; and from the establishment on both sides, including House Democratic Caucus Chairman John Larson of Connecticut and Republican Rep. Candice Miller of Michigan, a self-described “hawk.”

Reuters:

• Sony(SNE) Says Supply-Chain Woes to Affect 5 More Plants. Sony said on Tuesday shortages of parts and materials would force it to reduce or suspend production at five additional plants in Japan following the catastrophic earthquake this month. The plants, mostly in central and southern Japan, make products from digital cameras and video cameras to televisions and microphones, the company said in a statement. A sixth plant in Chiba, north of Tokyo, was set to resume production on Tuesday, but it could be interrupted by the rolling blackouts that are affecting some areas supplied by Tokyo Electric Power (TEPCO).
• California Cap-And-Trade Plan Faces Setback. California did not adequately consider alternatives to its plan to create a cap-and-trade market for carbon emissions, a judge ruled on Monday, throwing a wrench into the most aggressive U.S. effort to combat climate change. The state's regulator on climate change matters, the Air Resources Board (ARB), will need to consider other possibilities to meet state environmental law, San Francisco Superior Court Judge Ernest Goldsmith wrote in an opinion. In particular he said that the state had not made a thorough examination of putting a tax on carbon.
• The Chinese government will include local government debt in its national budget, Finance Minister Xie Xuren said. The Asian nation will establish a risk warning system for local government debt, Xie said.
  

Financial Times:

• Rift Over Command of Libya Campaign. French attempts to sidestep Nato at the outset of military operations against Libya have divided the international coalition enforcing a no-fly zone over the country, western diplomats said. The French moves, which western diplomats said included launching the first attack on Libya without fully informing its allies, angered US and UK officials and are hampering efforts to transfer command of the operation to Nato, officials said. Relations grew so tense on Monday that French and German ambassadors to Nato walked out of a meeting of the North Atlantic Council, the alliance’s decision-making body, after Anders Fogh Rasmussen, secretary-general, criticised Paris for impeding Nato involvement and Germany for not actively participating.

Sky News:

• Arab Bankers Association Chief Executive Officer George Kanaan said in an interview the turmoil in the Middle East and North Africa has created an environment of "great uncertainty" in which banks can no longer "function properly." The political unrest in Bahrain will end the country's aspirations of becoming a regional financial center, and its hopes "are no difficult to achieve," Kanaan said.
  

Jornal de Negocios:

• The Portuguese government forecasts the country's gross domestic product will contract .9% this year, citing the stability and growth program handed in to parliament today.

Commercial Times:

• Apple Inc.(AAPL) sent procurement staff to Taiwan after the earthquake in Japan to secure component supply for for the second quarter.

NHK:

• Live Japanese News Broadcast in English.

Kyodo News:

• Tokyo Electric Power Co. can't say when it can resume spraying water and restoring power at its crippled Fukushima Dai-Ichi nuclear plant because of steam and smoke coming from the reactors, citing the utility.
• The crisis at the Fukushima nuclear plant is not necessarily improving, citing Japan's Trade Minister Banri Kaieda.
• Seafood caught near Japan's crippled Fukushima Dai-Ichi nuclear plant hasn't entered the food supply, citing the Fukushima prefectural government.
  

People's Daily:

• Sustainable economic growth in China is being hurt by weakening "momentum" from investment and exports and "slow progress" in raising personal incomes, Zhang Monan, an economic researcher at the State Information Center, wrote today.

China Business News:

• Procter & Gamble Co. and Unilever raised prices for detergents in China by as much as 10%, citing dealers.

Evening Recommendations
Citigroup:

• Reiterated Buy on (DV), raised target to $64.

Night Trading

• Asian equity indices are -.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 115.0 -1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 117.0 -.5 basis point.
  
• S&P 500 futures -.27%.
  
• NASDAQ 100 futures -.20%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CMC)/-.07
• (DG)/.58
• (WAG)/.79
• (JEF)/.37
• (CCL)/.19
• (JBL)/.51
• (ADBE)/.57
• (CTAS)/.36
• (DFS)/.57

Economic Releases
10:00 am EST

• The January House Price Index is estimated to fall -.2% versus a -.3% decline in December.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Fisher speaking, Fed's Pianalto speaking, Richmond Fed Manufacturing Index for March, weekly retail sales reports, Sidoti Emerging Growth Forum, CTIA Wireless, JPMorgan Aviation/Transportation/Defense Conference, (FLO) analyst day, (UNFI) investor day, (GT) investor meeting and the (PCL) analyst meeting could also impact trading today.
  

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