Evening Headlines
Bloomberg:- EU Toughens Fiscal Pact Bowing to ECB Objections, Draft Shows. European Union governments set tougher rules on budget deficits in the latest draft of a planned fiscal treaty, bowing to some objections raised by the European Central Bank. The pact will require a centralized “correction mechanism” to be triggered “automatically” in cases of “significant” deviations from a target structural deficit of 0.5 percent of gross domestic product, according to the draft, which was obtained by Bloomberg News. It is dated Jan. 19. The blueprint, to be discussed Jan. 23 by EU finance ministers, also empowers the European Commission to set deadlines for budgetary convergence. It gives the European Court of Justice the power to fine countries whose balanced-budget laws don’t pass muster, while stopping short of the ECB’s request that the court more broadly enforce the budget rules.
- Europe's ESM Foresees Bond Clauses, IMF Restructuring Standards. Europe’s planned permanent rescue fund may require clauses in new bond issues that would leave the door open for debt restructurings, while deeming writeoffs “exceptional” and subject to International Monetary Fund standards, according to a draft text. European Union finance ministers meet Jan. 23 to discuss the draft, which waters down earlier provisions on restructuring after EU-mandated losses for Greek bondholders helped exacerbate the sovereign debt crisis. The treaty, which is not final and could change, still calls for clauses in bond contracts that would prevent small clusters of investors from blocking a restructuring. “Collective action clauses shall be included, as of one month after the entry into force of the present treaty, in all new euro area government securities, with maturity above one year, in a way which ensures that their legal impact is identical,” according to the draft, which was obtained by Bloomberg News. European governments have redoubled efforts to set up the 500 billion-euro ($647 billion) European Stability Mechanism by July, a year ahead of schedule, after a credit rating downgrade raised concerns over the strength of the temporary aid fund created at the outset of the crisis.
- Greek Debt Agreement Falls Far Short of What's Needed to Save Euro: View. At some point, possibly in the next several weeks, Europe will run into a major flaw in its plan to shore up the region’s finances: Some euro-area governments, such as Greece, simply aren’t going to be able to pay their debts. The sooner Europe’s leaders recognize this and take appropriate action, the less expensive the solution will be.
- China Home Market 'Should Come Down,' Hang Lung's Chan Says. China’s home market, bracing for the most severe slowdown in three years, should retreat after “extraordinarily tough” measures by the government, said Ronnie Chan, chairman of Hang Lung Properties Ltd. Home purchase limits and tighter mortgage requirements imposed by the government “just choked the market,” Chan, whose Hong Kong-based developer is investing more than HK$40 billion ($5.2 billion) building shopping malls in China, said in a Bloomberg Television interview today. The nation’s home transactions will fall 10 percent this year, according to Daiwa Securities Capital Markets, while UBS AG says the curbs may boost supply to the highest in a decade. Chan, whose company has been developing real estate in China since early 1990s, said he’s “not sure” when the government will start easing its property measures. “If I were them, I’d be cautious too,” he said. The measures “have loosened a bit. But on the other hand, what assurance will they have that prices will come down on a sustainable basis.”
- BofA(BAC) Says Loan Repurchase Claims Rise to Record $14.3 Billion. Bank of America Corp., the second- biggest U.S. lender by assets, said unresolved demands from investors who accuse the company of selling defective mortgages rose to a record. Outstanding claims jumped 22 percent in three months to $14.3 billion as of Dec. 31, the Charlotte, North Carolina-based bank said today in a presentation. The increase was fueled by disputes with Fannie Mae and private investors who are submitting demands for compensation on the grounds that they were misled about the quality of mortgage securities.
- Oil Near One-Week Low as Fuel Demand Declines to Lowest in 10 Years. Oil traded near a one-week low as investors bet that fuel demand may falter after gasoline stockpiles rose and consumption fell to the lowest level in 10 years in the U.S., the world’s biggest crude consumer. Futures were little changed after slipping 0.2 percent yesterday. Gasoline use dropped to the lowest since September 2001, while supplies of the motor fuel increased to the highest level in 10 months, according to data from the U.S. Energy Department. U.S. gasoline consumption dropped 2.2 percent to 8 million barrels a day last week, the lowest since the week ended Sept. 21, 2001, when it slid to 7.8 million barrels, according to data from the Energy Department. Motor fuel stockpiles rose 3.72 million barrels last week to 227.5 million, the highest since the week ended March 4.
- Korean Shipyards to Buy 12% Less Steel Plate as Slump Hits Posco. South Korean shipyards plan to buy 12 percent less steel plate this year, worsening a demand slump that has hit prices at Posco, the world’s biggest producer. Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. will cut purchases to a combined 6.5 million metric tons from 7.4 million tons, according to company figures. The yards are the world’s biggest buyer of steel plate, which is used for making hulls and in construction. “Steelmakers are in for a tough year,” said Bang Minjin, an analyst at HI Investment & Securities Co. in Seoul. “Their one bright spot is about to fade.”
- Icahn Said to Buy LightSquared Debt in Bet on Falcone Venture's Collapse. Billionaire Carl Icahn has purchased debt from Philip Falcone’s LightSquared Inc.’s bondholders as the satellite-broadband-service provider struggles to start service, two people familiar with the transaction said. Icahn, along with investors Andrew Beal and David Tepper purchased $300 million in LightSquared debt sold by Farallon Capital Management LLC. last month, said the people, who declined to be named because they weren’t authorized to speak. The move may give Icahn control of LightSquared’s radio spectrum for less than Falcone originally paid.
- China's Goldwind Buys Two 10-Megawatt Montana Wind Farms From Volkswind. Xinjiang Goldwind Science & Technology Co., China’s second-largest wind-turbine maker, is seeking to become a bigger supplier in the U.S. by purchasing two 10-megawatt wind farms in Montana to showcase its equipment. The two farms jointly comprise the Musselshell Project in Shawmut, Montana, and were acquired from the U.S. unit of Germany’s Volkswind GmbH, the Xinjiang-based company said yesterday in an e-mailed statement. Goldwind’s turbines are already operating in Minnesota and Iowa, and with the Musselshell project they’re due to be installed at sites in six more states, the company said. The deal shows growing momentum for the Chinese supplier in the U.S., said Amy Grace, a wind analyst for Bloomberg New Energy Finance.
Wall Street Journal:
- NYSE(NYX) May Appeal If Deutsche Boerse Deal Blocked. The head of NYSE Euronext (NYX) said the exchange may appeal if European regulators block its planned merger with Deutsche Boerse AG (DBOEF, DB1.XE).
- BNP Considers Greek-Debt Outcomes, Chances For CDS Triggers. Three out of four possible outcomes of the Greek-debt crisis described by BNP Paribas SA (BNP.FR, BNPQY) strategists in a client note Thursday would likely trigger the net $3.2 billion of credit-default swaps covering the country's sovereign debt for payouts.
- Hedge-Fund Investors Pull Cash. Hedge-fund investors, rattled by lackluster performance, yanked more money from the industry than they added during the final months of 2011, data released Thursday showed. The $2 trillion hedge-fund industry saw net investor withdrawals of about $127 million in the fourth quarter, according to data by Hedge Fund Research Inc. It was the first time investors had collectively pulled out more money than they put in since the second quarter of 2009, when the markets were still digging out of the worst of the financial crisis.
- Homeowners Stop Waiting to Spruce Up. Americans are stepping up spending on home improvements for the first time in years, giving a small lift to the beleaguered construction sector. Economists forecast that spending by homeowners and landlords on everything from minor sprucing up to full-scale remodeling rose modestly in 2011. That would mark the first year since 2006 that such spending increased. Forecasting firm IHS Global Insight is predicting a 3.3% increase to $152.4 billion in 2011, not adjusted for inflation, and an additional 5.7% in 2012.
- Fewer Debaters, Plenty of Heat. Republican presidential candidate Newt Gingrich kicked off Thursday's final debate before the South Carolina primary by taking the media to task for asking a question about one of his marriages, setting the tone for a combative debate among the four remaining GOP candidates.
- Fed Holds Off for Now on Bond Buys. Federal Reserve officials are waiting to see how the economy performs before deciding whether to launch another bond-buying program. The Fed meets again next Tuesday and Wednesday, and officials are preparing to roll out a new communications strategy that is on track to include two key elements: their interest-rate projections and a statement explaining their objectives for inflation and employment. Clarifying the central bank's objectives could make easier the tasks of deciding whether to buy more bonds and explaining their reasons.
- The Greece Next Door. Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That's been the sad pattern in Europe, and now it's hitting that mecca of tax-and-spend government known as Illinois.
MarketWatch: Business Insider:
Zero Hedge:
- "Don't Frack Me Up". So next time someone says that America should put an end to fracking, ask them how they plan to ensure America's energy security over the next 30 to 50 years. If the answer involves alternative or renewable energies, ask for some hard facts and numbers to support it. Like it or not, none of our alternative energies are as yet even close to stepping up as a major energy pillar for America. Natural gas is ready to step up.
CNBC: IBD:
CNN:
- Obama's Keystone Pipeline Nix Worries Small Business. The hopes of some small business owners in the Nebraskan towns of Fairbury and Steele City were crushed when the Obama administration rejected a proposed expansion of the Keystone oil sands pipeline. Extending the Canadian pipeline 1,179 miles to the area promised both towns another chance to bounce back from the ongoing economic crisis.
The Hill:
- Dems Propose 'Reasonable Profits Board' To Regulate Oil Company Profits. Six House Democrats, led by Rep. Dennis Kucinich (D-Ohio), want to set up a "Reasonable Profits Board" to control gas profits. The Democrats, worried about higher gas prices, want to set up a board that would apply a "windfall profit tax" as high as 100 percent on the sale of oil and gas, according to their legislation. The bill provides no specific guidance for how the board would determine what constitutes a reasonable profit. The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding "a reasonable profit." It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms. Unlike other bills setting up advisory boards, the Reasonable Profits Board would not be made up of any nominees from Congress.
Reuters:
Financial Times:
- Italy’s banks tap ECB for €50bn. Italy’s banks, led by UniCredit, were the biggest users of the special three-year funding mechanism launched by the European Central Bank in December, according to a new research report.
Telegraph:- The IMF Is No Longer Serving Its Purpose. To save the eurozone, the International Monetary Fund needs to dispense tough love, not endless bail-outs.
- IMF Slashes global Forecast On Eurozone Crisis, With Drastic Falls In Italy And Spain. "The global recovery is threatened by the growing tensions in the euro area," the Fund said, according to a leaked draft of its World Economic Outlook which is due to be published next week. Global GDP growth is to be cut from 4pc to 3.3pc, with drastic revisions for an arc of countries in Southern Europe. Italy's economy will contract by 2.2pc and Spain's by 1.7pc as fiscal austerity measures bite harder and banks curtail lending, playing havoc with debt dynamics. The eurozone as a whole will shrink by 0.5pc, down from growth of 1.1pc in the Fund's last forecast in September, an even grimmer outlook for the region than growth revisions released by the World Bank earlier this week. The new figures are an admission that the IMF has been caught badly off guard by fast-moving events. It appears to misjudged the gravity of the crisis in Southern Europe. The new forecasts explain why the Fund is requesting a $600bn (£388bn) boost to its firepower.
- Portugal To Need "Debt Haircut" as Economy Tips Into Grecian Downward Spiral. Portugal's borrowing costs have jumped to record highs and are tracking the moves seen in the culminating phase of Greece's debt crisis, dashing hopes that the country will be able to stave off contagion by embracing drastic austerity. Yields on Portugal's 10-year bonds climbed to 14.39pc on Thursday. Credit default swaps measuring bond risk have reached 1270 points, pricing a two-thirds chance of default over the next five years.
Globe and Mail:- Canadian Banks Warn Proposed Volcker Rule Could Violate NAFTA. Canada’s Big Five banks have sent a stern letter to U.S. regulators, warning that proposed rules designed to limit the risks major financial institutions take may violate the two countries’ free trade agreement. The banks say the legislation in question – known as Volcker rule – will also have serious, unintended consequences in the Canadian mutual fund market if changes aren’t made.
The Australian:
- Hackers Take Out US Site In Retaliation For Megaupload.com Arrests. HACKERS aligned with the global cyber-collective known as Anonymous have claimed responsibility for taking down at least six prominent websites. They include those of the US Department of Justice and Universal Music Group, acts done in retaliation for charges levied against principals of content-sharing site Megaupload.com. Both Universalmusic.com and Justice.gov have crashed in the US and remained down as of 10:50am AEST. The group also said it brought down the websites of the Recording Industry Association of America (RIAA), the Motion Picture Association of America (MPAA), the US Copyright Office and the Utah Chiefs of Police Association. As of 10:50am AEST, only the MPAA website remained functional. The RIAA site and the Copyright Office sites were both down, while the Utah Chiefs of Police site had been altered to show the logo for Megaupload.com. The group also threatened that the FBI's website would be hacked next. "Word has it that FBI.gov is next to go down... will report when it is," a Twitter account affiliated with the group said.
Xinhua:
- Chinese Premier Wen Jiabao said the country will target "basically stable" consumer prices, citing comments he made while visiting Chinese citizens in Qatar. The global financial crisis is deepening and spreading, Wen said.
National Business Daily:
- China's power demand growth may fall by 2 percentage points this year from 2011, citing Wei Zhaofeng, deputy director at the China Electricity Council.
Evening Recommendations
CSFB:- Reiterated Outperform on (FCX), lowered estimates, target $55.
Night Trading- Asian equity indices are +.50% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 191.0 -6.5 basis points.
- Asia Pacific Sovereign CDS Index 153.0 -4.25 basis point.
- FTSE-100 futures -.12%.
- S&P 500 futures -.01%.
- NASDAQ 100 futures +.22%.
Morning Preview Links
Earnings of NoteCompany/Estimate
- (PH)/1.63
- (CMA)/.51
- (SLB)/1.09
- (STI)/.27
- (FITB)/.35
- (GE)/.38
- (HTLD)/.18
Economic Releases
10:00 am EST
- Existing Home Sales for December are estimated to rise to 4.65M versus 4.42M in November.
Upcoming Splits
Other Potential Market MoversBOTTOM LINE: Asian indices are higher, boosted by technology and financial 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.
Broad Market Tone: - Advance/Decline Line: Higher
- Sector Performance: Most Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst: - VIX 19.98 -4.36%
- ISE Sentiment Index 96.0 -26.72%
- Total Put/Call .73 -13.10%
- NYSE Arms .99 +59.05%
Credit Investor Angst:- North American Investment Grade CDS Index 107.57 -4.78%
- European Financial Sector CDS Index 204.78 -5.43%
- Western Europe Sovereign Debt CDS Index 353.65 -2.54%
- Emerging Market CDS Index 287.40 -3.62%
- 2-Year Swap Spread 35.0 -1 bp
- TED Spread 53.0 -1 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -77.0 unch.
Economic Gauges:- 3-Month T-Bill Yield .04% +2 bps
- Yield Curve 175.0 +9 bps
- China Import Iron Ore Spot $139.70/Metric Tonne -.14%
- Citi US Economic Surprise Index 71.60 +1.7 points
- 10-Year TIPS Spread 2.11 +5 bps
Overseas Futures: - Nikkei Futures: Indicating +75 open in Japan
- DAX Futures: Indicating -2 open in Germany
Portfolio:
- Higher: On gains in my Tech, Retail and Medical sector longs
- Disclosed Trades: Covered all of my (IWM), (QQQ) hedges and some of my (EEM) short, then added some back
- Market Exposure: 75% Net Long
Bloomberg:- Borrowing Costs Drop as France Joins Spain in $18.8 Billion of Bond Sales. France and Spain sold 14.6 billion euros ($18.8 billion) of bonds, with both nations’ funding costs falling in the first sale of medium and long-term debt since Standard & Poor’s downgraded their ratings. France sold 7.97 billion euros of notes, just short of its maximum target, with the average yield on the benchmark two-year notes sliding to 1.05 percent from 1.58 percent in October. Spain sold 6.61 billion euros in bonds maturing in 2022, 2019 and 2016, more than its maximum target of 4.5 billion euros. It issued debt due 2022 at an average of 5.403 percent, down from 6.975 percent in November.
- Banks Flush With ECB Cash Outperform. Banks are beating euro governments in credit markets by the most since July as European Central Bank loans stave off punitive borrowing costs for lenders such as BNP Paribas SA (BNP) and UniCredit SpA facing debt downgrades. The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 European banks and insurers now costs 104 basis points less than the Markit iTraxx SovX Western Europe Index of swaps on 15 governments. That compares with a 28 basis-point gap at the end of November and a record 118 in July. Historically, it costs more to insure banks than governments. The ECB’s 489 billion euros ($623 billion) of three-year loans are a lifeline for lenders competing with governments to borrow about $2 trillion this year as they seek to refinance maturing bonds and bills, according to data compiled by Bloomberg. While banks based in euro-area countries that still have top credit grades are able to issue unsecured bonds, lenders from nations whose ratings have been lowered, or face cuts, are frozen out. “The ECB offered the banks a guaranteed source of liquidity,” said Nigel Sillis, who helps oversee about $53 billion as director of fixed income and currency research at Baring Asset Management Ltd. in London. “They’ve used it in big size and that’s taken the worst of the liquidity risk out of the market.”
- Sovereign, Corporate Bond Risk Falls, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt fell, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments declined nine basis points to 348 at 12 p.m. in London, the lowest since Dec. 7. A decline signals improvement in perceptions of credit quality. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 20.5 basis points to 664, the lowest since Oct. 31, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 4.25 basis points to 157.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 12 basis points to 337 and the subordinated index dropped 19 to 437.
- Obama's Rejection of Keystone Pipeline Sets Up Campaign Battle. President Barack Obama’s rejection of TransCanada Corp.’s Keystone XL pipeline permit exposed a split in a core Democratic constituency and handed Republicans a new line of election-year attack. Unions representing construction workers condemned the move while labor groups including the United Steel Workers, the United Auto Workers and the Service Employees International Union joined with environmental advocates in saying they support Obama’s decision. It also triggered swift criticism from congressional Republicans and the party’s presidential candidates. “The Republicans’ argument that he’s trying to run a populist campaign firing up the liberal base and that this is all politics at the expense of jobs is going to be an important continuing issue through much of the campaign,” said David Gergen, director of Harvard University’s Center for Public Leadership in Cambridge, Massachusetts, and an adviser to presidents of both parties. Obama is heading into his re-election campaign with the U.S. still rebounding from the worst recession since the Great Depression and an unemployment rate that has been stuck above 8 percent for almost three years.
- U.S. Jobless Claims Lowest in Nearly Four Years. Fewer Americans than forecast filed first-time applications for unemployment benefits last week, easing concern that post-holiday firings were on the rise. Claims plunged by 50,000 to 352,000 in the week ended Jan. 14, the lowest level since April 2008, Labor Department figures showed today in Washington. The median forecast of 41 economists in a Bloomberg News survey projected 384,000. A Labor Department spokesman said the decrease reflected volatility seen during this time of year. The four-week average, which smoothes out fluctuations, decreased to 379,000 last week from 382,500. Companies are slowing the pace of firings and beginning to step up the pace of hiring even as a slump in Europe spurred by a default crisis may limit U.S. growth. The improvement may be a sign that companies are looking to expand their workforces as sales climb. “You’ve got a gradual improvement in the labor market,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, whose forecast of 363,000 was the lowest. Because of “choppiness with the beginning of the calendar year, you have to look at the four-week moving average” which he said was “encouraging.” Other data today showed housing starts in December dropped more than forecast and consumer prices were little changed.
- Philadelphia-Area Manufacturing Increases. Manufacturing in the Philadelphia region expanded at faster pace in January as employment picked up and factories grew more optimistic about business in the next six months. The Federal Reserve Bank of Philadelphia’s general economic index increased to a three-month high of 7.3 from 6.8 in December, according to a report released today. Economists surveyed by Bloomberg News forecast the gauge would rise to 10.3. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
- Fracking Market to Grow 19% to $37 Billion Worldwide in 2012. The worldwide market for hydraulic fracturing will grow 19 percent this year to a record $37 billion, one-third the pace of expansion in 2011 after tumbling natural-gas prices discouraged exploration for the fuel, said Spears & Associates Inc. In North America, which accounted for 87 percent of the fracking market last year, spending on the technique used to extract oil and gas from shale will top $30 billion in 2012, said Richard Spears, vice president of the Tulsa, Oklahoma-based firm that advises about 400 oil producers, hedge funds, equipment providers and manufacturers. Demand for fracking services this year will grow slower than 2011’s 63 percent rate because of declining interest in searching for gas, which as recently as three years ago dominated the market, Spears said today during a conference call sponsored by Credit Suisse USA Holdings Inc. “Natural-gas drilling has not grown, it’s shrunk,” Spears said. “All the growth is on the oil side.”
Wall Street Journal:- Kodak Files for Bankruptcy Protection. Eastman Kodak Co. filed for Chapter 11 bankruptcy protection in New York early Thursday morning, after the struggling photography icon ran short on cash needed to fund a long-sputtering turnaround.
- Perry Abandons Presidential Bid. Texas Gov. Rick Perry dropped out of the presidential race Thursday and threw his support behind Newt Gingrich for the Republican nomination. Mr. Perry, speaking at a news conference, said he saw no viable path forward and was therefore suspending his campaign and endorsing Mr. Gingrich.
- Google(GOOG) Deepens Push Into Display Ads.
MarketWatch:
CNBC.com:
Business Insider: Zero Hedge:
Tages-Anzeiger:
- Harvard University Professor Kenneth Rogoff said he sees a risk of more than 80% that at least one or two countries will leave the 17-member euro region in the coming years. "Greece, Portugal, Ireland and possibly also Spain are involvent and need a restructuring of their debt." Rogoff also said it's "problematic" to think that the ECB "could create money with a magic act, purchase bonds of problem nations and hide them in a dark corner of its balance sheet." That's "a Ponzi scheme, which eventually collapses." He said European banks need "hundreds of billions of euros" of fresh capital.
Expansion:
- Spanish Prime Minister Mariano Rajoy forecast the economy may contract by more than .5% this year, citing officials who participated in a meeting this week between Budget Minister Cristobal Montoro and regional authorities.
Style Underperformer:Sector Underperformers:- 1) Gold & Silver -2.0% 2) Oil Tankers -1.79% 3) Alt Energy -1.71%
Stocks Falling on Unusual Volume:- HMY, NRG, UNH, BMY, NFG, CNP, FSLR, EGOV, FCS, USB, CVBF, EA, CPHD, ZOLL, UBNT, NAT, SJT, JCI, CRT, GDI, ATLS, NAV and BKU
Stocks With Unusual Put Option Activity:- 1) NTAP 2) MNKD 3) JCI 4) DBA 5) WFT
Stocks With Most Negative News Mentions:- 1) ZZ 2) WAG 3) KMP 4) MBI 5) BKU
Charts:
Style Outperformer:Sector Outperformers:- 1) I-Banks +3.70% 2) Road & Rail +2.60% 3) Networking +2.10%
Stocks Rising on Unusual Volume:- BCS, MS, YOKU, DB, CRM, CS, CREE, ADSK, INFA, VECO, PBH, E, PLXS, FFIV, CATM, XLNX, SHLD, EBAY, GLNG, RVBD, NTAP, OSUR, BXS, PVG, MAG, KCG, APKT, COL, FSL, CRM, NFLX, ARUN, HSP, UNP, JNPR, RJF, AMTD, JBL, GS, JCP, PGR and CME
Stocks With Unusual Call Option Activity:
- 1) NTAP 2) CS 3) SWKS 4) MMI 5) WPI
Stocks With Most Positive News Mentions:- 1) FFIV 2) EBAY 3) FWLT 4) T 5) BA
Charts:
Evening Headlines
Bloomberg:- Weidmann Says ECB Should Resist Pressure to Use 'Nuclear Option' in Crisis. European Central Bank Governing Council member Jens Weidmann said policy makers should resist pressure to increase government bond purchases in response to the euro region’s debt crisis. Some are demanding that the ECB turn to the “bazooka” or “nuclear option” of “engaging in unlimited government bond purchases and limiting yields,” Weidmann, who heads Germany’s Bundesbank, said in a speech in Ludwigsburg late yesterday. “There are a number of legal, economic and political reasons why we shouldn’t do this,” he said. Such an approach would violate European Union law, take away the incentive for governments to implement fiscal reforms and redistribute losses within the currency union, Weidmann said. While the ECB has bought 217 billion euros ($279 billion) of bonds from distressed member countries since May 2010, President Mario Draghi says the program is temporary, limited and aimed solely at improving the transmission of interest rates on financial markets. It’s wrong to compare the ECB with the U.S. Federal Reserve, Weidmann said. “The Fed is the central bank of a nation state and not of a monetary union, in which the financing of governments through the printing press is forbidden,” he said. In addition, Fed- style quantitative easing aims to reduce long-term interest rates in a capital market-based financial system and not at cutting refinancing costs for individual states, Weidmann said.
- China Developers Ease Home Sales in Face of Worst Year Since '08. China’s biggest developers slowed home sales toward the end of 2011, bracing for the worst property market in three years as the government vows to keep real-estate curbs. Contract sales, or sales booked before apartments are completed, dropped 30 percent last month at China Vanke Co., as the country’s biggest developer by market value offered fewer homes from November. Evergrande Real Estate Group Ltd., the second-biggest Chinese developer by revenue, said sales in November and December were the lowest for the year.
- U.S. Mutual Funds Attract Most Deposits in Almost Two Years. U.S. mutual funds attracted the most money in almost two years last week as investors poured cash into bond funds and some returned to stock funds. Funds had net deposits of $11.3 billion in the week ended Jan. 11, the Investment Company Institute said today in an e- mailed statement. The last time mutual funds took in that much money was the week ended April 21, 2010, when they gathered $12.6 billion in deposits, according to the Washington-based trade group.
- House Casts Symbolic Vote Opposing in U.S. Debt Limit Rise. The U.S. House approved a symbolic measure opposing an increase in the nation’s debt limit in what will probably be the first in a series of election-year votes aimed primarily at wooing those headed for the polls in November. Lawmakers voted 239-176 for a resolution rejecting President Barack Obama’s request to raise the legal cap on borrowing by $1.2 trillion.
- Egypt Revolt Loses Legitimacy as Brotherhood Ignores Women Abuse. A group of men gathered around Amira El Bakry in Tahrir Square as she brandished a newspaper photo that shocked many Egyptians. It showed troops dragging a female protester along the street, her robe ripped open to reveal a blue bra and bare midriff. “Is this OK by you?” the 25-year-old El Bakry, her voice shaking with anger, asked the men, as they squinted at the picture and one suggested the protester was trying to cause a scene. Later, El Bakry marched through Tahrir with thousands of women to condemn the brutality and demand that Egypt’s military rulers step down. Some at the Dec. 20 rally wore tight jeans tucked in boots, others were in flowing robes and full-face veils. “The women of Egypt are a red line,” they chanted.
- America's Dirty War Against Manufacturing(Part 2): Carl Pope.
- Australian Job Losses Cap Worst Year Since 1992. Australian employers unexpectedly cut jobs in December, capping the labor market’s worst year in almost two decades, as investors raised bets on interest-rate reductions. The local currency declined. The number of people employed fell by 29,300 last month after a revised 7,500 drop in November, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of 23 economists was for a 10,000 increase. The year ended with a revised 5.2 percent jobless rate and little change in payrolls from December 2010, their worst annual performance since 1992.
- EBay(EBAY) Beats Fourth-Quarter Estimates on Holiday Sales, PayPal Unit’s Growth. EBay Inc. (EBAY), the largest Internet marketplace, reported fourth-quarter sales and profit that beat estimates, as more consumers used the PayPal online-payments service and holiday shoppers flocked to its e-commerce site.
Wall Street Journal:
- New Chief of S&P Defends Its Moves.
- Interview: Eurozone Needs Federalist - Type System - Cantor CEO. The 17 members of the European Union will inevitably move towards a federalist system that will enable it to impose a pan-European tax to bolster its bailout fund.
- FBI Sweep Targets Big Funds. Federal prosecutors alleged that a "criminal club" in the hedge-fund world made tens of millions of dollars trafficking inside information, following up on a string of early morning arrests that involved employees of SAC Capital Advisors LP and other prominent financial firms. In an expansion of a high-profile investigation into alleged insider trading, the Federal Bureau of Investigation arrested four people in New York, Boston and California, and the government unsealed charges against three others. All were charged criminally with securities fraud and conspiracy to commit securities fraud.
- Obama Rejects the Keystone XL Pipeline and Blames Congress.
Business Insider:
CNBC: NY Times:
- Hedge Funds May Sue Greece If It Tries To Force Loss. The novel approach would have the funds arguing in the European Court of Human Rights that Greece had violated bondholder rights, though that could be a multiyear project with no guarantee of a payoff. And it would not be likely to produce sympathy for these funds, which many blame for the lack of progress so far in the negotiations over restructuring Greece’s debts.
BGR: AP:- Illinois Backlog of Unpaid Bills Nears $8.5 Billion. The Illinois comptroller's office is sitting on nearly $4.3 billion in overdue bills and other departments are behind on their bills because the state doesn't have the money to make good on its debts, Comptroller Judy Baar Topinka said Wednesday. The total backlog of Illinois' unpaid obligations comes to about $8.5 billion, according to the latest report from Topinka's office.
Reuters:
- Spain, France Brace For Euro Long-Term Debt Test. The euro zone should pass the biggest test of demand this year for its longer term debt on Thursday when Spain and France offer a combined 14 billion euros of bonds, with the backstop of ECB support and relatively high yields likely to encourage buyers. Other sovereign debtors have leapfrogged Spain to become more prominent market targets but Madrid's first 10-year bond offering since mid-December will grab the most attention among the nine debt issues that will go on sale there and in Paris.
Telegraph:- Doubt Over IMF"s Eurozone Lifeline. Traders were unconvinced by a radical proposal by the International Monetary Fund (IMF) to deploy $1 trillion (£648bn) to stem the European debt crisis and its impact on the global economy.
SpiegelOnline:
- Commerzbank Shortfall 'Bigger Than First Thought'. Commerzbank, Germany's second-largest bank, needs even more capital than previously believed, according to reports. The bank may be forced to take emergency steps to tackle the six-billion-euro shortfall. Meanwhile, ratings agency Moody's may downgrade Commerzbank's creditworthiness. The capital shortage at Commerzbank is apparently much larger than previously believed. The major German lender needs around €6 billion ($7.7 billion), daily Die Welt reported on Wednesday. Until now, the European Banking Authority (EBA) regulatory body had estimated the shortfall at €5.3 billion. But that isn't the only bad news for Commerzbank -- ratings agency Moody's has said it may downgrade the bank's creditworthiness because of its exposure to troubled real estate lender Eurohypo. According to Die Welt, the need for the extra funds is due to the ongoing negotiations for a debt 'haircut' for Greece. Germany's second-largest bank held Greek bonds worth €1.4 billion at the end of the third quarter last year, even though it had written off 50 percent of them in 2011. That writedown may no longer be enough, however, as an even higher debt cut has reportedly been proposed in the negotiations between Greece and private creditors. Such a debt write-off is apparently close to becoming a reality for Commerzbank, which is already working hard to find a solution to its huge capital gap.
WAZ:
- Deutsche Bank AG management-board member Juergen Fitschen said the amount of cash deposited by lenders at the ECB constituted a "fear indicator" that exceeded the level of 2008. Fitschen, who along with investment-banking chief Anshu Jain will succeed CEO Josef Ackermann at the bank, also said that Greece could leave the euro-zone before undergoing the "catastrophe" of a collapsing economy. The price of a debt restructuring could be an economic contraction of as much as 8%, Fitschen said in an interview.
Evening Recommendations
CSFB:- Rated (PAYX) Outperform, target $36
- Rated (GPN) Outperform, target $55.
- Rated (CATM) Outperform, target $31.
Night Trading- Asian equity indices are +.50% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 197.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 157.25 +.75 basis point.
- FTSE-100 futures +.43%.
- S&P 500 futures +.03%.
- NASDAQ 100 futures +.13%.
Morning Preview Links
Earnings of NoteCompany/Estimate
- (LUV)/.08
- (PGR)/.35
- (FCS)/.16
- (BBT)/.53
- (UNH)/1.04
- (BLK)/2.98
- (BAC)/.13
- (JCI)/.62
- (MS)/-.57
- (COL)/.84
- (UNP)/1.82
- (FCX)/.61
- (PPG)/1.27
- (IBKR)/.24
- (COF)/1.54
- (ISRG)/3.34
- (IBM)/4.62
- (GOOG)/10.49
- (AXP)/.99
- (INTC)/.61
- (MSFT)/.76
Economic Releases
8:30 am EST
- The Consumer Price Index for December is estimated to rise +.1% versus unch. in November.
- The CPI Ex Food & Energy for December is estimated to rise +1% versus a +.2% gain in November.
- Housing Starts for December are estimated to fall to 680K versus 685K in November.
- Building Permits for December are estimated to fall to 679K versus 681K in November.
- Initial Jobless Claims are estimated to fall to 384K versus 399K the prior week.
- Continuing Claims are estimated to fall to 3590K versus 3628K prior.
10:00 am EST
- Philly Fed for January is estimated at 10.3 versus 10.3 in December.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +3,000,000 barrels versus a +4,958,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,375,000 barrels versus a +3,985,000 barrel gain the prior week. Gasoline inventories are estimated to rise by +2,350,000 barrels versus a +3,610,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a +.6% gain the prior week.
Upcoming Splits
Other Potential Market Movers- The 10-Year TIPS Auction, Bank of America Merrill Lynch Gaming Conference, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for January and the (FUN) Investor Meeting could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by technology and financial 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.
