Today's Headlines

Bloomberg:

• Greece Talks Enter 'Final Phase' on Second Bailout to Secure Place in Euro. Greece may conclude a seven-month effort to wrap up its second bailout in the coming days with the country’s stability hanging in the balance. A plan that’s been in the works since July may emerge from parallel talks among caretaker Prime Minister Lucas Papademos’s coalition members; international monitors and Greek officials; and Greece’s government and its creditors, as well as tussles involving European central bankers and political leaders. “We are in the final phase of this very critical process to shape a new financing program for Greece and to complete the loan agreement which will lighten the burden of public debt and ensure funding for years to come,” Papademos said in a statement today in Athens. The plan will help “restore fiscal stability, improve competitiveness, revive the economy and increase employment.” The rescue blueprint includes a loss of more than 70 percent for bondholders in a voluntary debt exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table. Open questions involve how much more aid Greece needs, how much more austerity is required, and how to involve the European Central Bank in the debt swap.
  
• ECB Considers Using Bond Holdings for Greece. The European Central Bank is considering using its bond holdings to bolster Greece’s next rescue program and support efforts to contain the sovereign debt crisis, three euro-region officials said. Under one plan, the ECB could sell its Greek bonds to the European Financial Stability Facility at the price it paid for them rather than accept a loss along with private creditors, two of the people said. The EFSF is against that proposal because it may stretch its capacity, the officials said. Another plan is for euro-area central banks to give up profits or take losses on Greek bonds in their investment portfolios. Several options are under informal consideration and none have gained traction so far, two of the officials said. Spokespeople for the ECB and the EFSF declined to comment.
• Payrolls Jump Casts Doubt on Fed Rate Pledge. The U.S. jobless rate unexpectedly fell in January to the lowest in three years as payrolls climbed more than forecast, casting doubt on the Federal Reserve’s plan to keep interest rates low until late 2014. The unemployment rate dropped to 8.3 percent, the lowest since February 2009, Labor Department figures showed today in Washington. The 243,000 increase in jobs was the biggest in nine months and exceeded the most optimistic forecast in a Bloomberg News survey. Service industries grew by the most in a year, according to a separate report. The median projection in the Bloomberg survey called for payrolls to rise by 140,000. Estimates of the 89 economists ranged from increases of 95,000 to 225,000. Revisions added a total of 60,000 jobs to payrolls in November and December. Sustained increases of around 200,000 jobs a month are needed to bring the unemployment rate down one percentage point over a year, according to Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. The unemployment rate, derived from a separate survey of households, was forecast to stay at 8.5 percent, according to the survey median. The drop in the jobless rate reflected a 381,000 decrease in unemployment at the same time 250,000 Americans entered the labor force. The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 15.1 percent from 15.2 percent. The number of unemployed Americans dropped to 12.8 million, the lowest since January 2009, from 13.1 million in December. Still, the number of those who have been unemployed for 27 weeks or more -- a source of concern for the Fed -- was little changed at 5.52 million and accounted for almost 43 percent of the total.
• Falcone's Harbinger Hedge Fund Lost 47% in '11. Phil Falcone’s Harbinger Capital Partners LLC lost 47 percent for investors in his main hedge fund last year as he was forced to slash the value of his troubled wireless venture by more than half, according to a person familiar with the results.
• Lawyers Rank Third on Obama Donor List Even With Lobbying Ties. President Barack Obama’s top sources of campaign funds include employees at law firms that made $20 million last year trying to influence Washington. Obama, who has raised $128 million toward his re-election, doesn’t accept contributions from registered lobbyists, a policy that doesn’t apply to others who work in their firms. The restriction hasn’t affected his fundraising, as 6 of the president’s 20 biggest sources of money were law firms that lobby for companies such as Google Inc. (GOOG), AT&T Inc. (T), and MasterCard Inc. (MA), and he received more money from lawyers and others at law firms than any other presidential candidate last year, according to the Center for Responsive Politics, a Washington-based group that tracks political giving. “Basically, they’re not taking money from the messenger boys but they are taking money from the people sending the message,” said Bill Allison, editorial director at the Sunlight Foundation, a Washington-based advocacy group.
• BofA(BAC) JPM Chase(JPM) Sued by New York Over MERS. Bank of America Corp., Wells Fargo & Co.(WFC) and JPMorgan Chase & Co. were sued by New York Attorney General Eric Schneiderman over the creation and use of a mortgage database. The banks’ use of the database, known as MERS, has led to deceptive and fraudulent foreclosure filings in New York state and federal courts, Schneiderman said in a statement today.

Wall Street Journal:

• Rosler Opposes ECB Write-Down on Greece. A German cabinet minister rejected demands to involve the European Central Bank directly in efforts to reduce Greece's debt as international pressure is growing on the ECB to make a significant contribution to restructuring Athens' debt by accepting a haircut on its huge cache of Greek bonds. "This is not currently an issue for us," said German Economy Minister Philipp Rösler in an exclusive interview with Dow Jones Newswires and The Wall Street Journal, when asked whether the ECB should be involved in Greece's debt restructuring.
• Copper Jumps on Jobs Data. The most-actively traded contract, for March delivery, was recently up 9.05 cents, or 2.4%, at $3.8715 a pound on the Comex division of the New York Mercantile Exchange. Copper touched an intraday high of $3.8740, but is still off the year's high of $3.9390 set Jan. 27.

Barron's:

• Apple(AAPL): Gardner Offers 'Key Points' of Cook, Oppenheimer Meeting. Citigroup’s Richard Gardner this morning reiterates a Buy rating on shares of Apple (AAPL) and a $600 price target after hosting a meeting on Thursday with chief executive Tim Cook and CFO Peter Oppenheimer on Apple’s campus.

CNBC.com:

• Jobs Growth Raises Questions About GDP Forecasts, Fed.
• Jobs Up, But Small Business Survey Reports Little Gain.
• Apple(AAPL) iTV Coming Late This Year: Munster.
  

Business Insider:

• This Greek Newspaper Has The Most Depressing Twitter Feed In Europe.
• Micron's(MU) CEO Steve Appleton Has Died In A Plane Crash.
• New Data Suggests North Korea Has Much Bigger Atomic Bombs Than Anyone Thought.
• Frenzy! Facebook's(FB) Now Trading At A $95 Billion Valuation In The Private Markets.
  

Zero Hedge:

• Record 1.2 Million People Fall Out Of Labor Force In One Month, Labor Force Participation Rate Tumbles To Fresh 30-Year Low. (graph)
• Greece Draws The Line As Unity Government Leaders Refuse To Cede To Further Troika Austerity Demands.

New York Times:

• SEC Consistently Treats Biggest Banks With Light Hand. Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.

Washington Post:

• U.S. Officials Concerned by Israel Statements on Iran Threat, Possible Strike. Israeli leaders on Thursday delivered one of the bluntest warnings to date of possible airstrikes against Iranian nuclear sites, adding to the anxiety in Western capitals that a surprise attack by Israel could spark a broader military conflict in the Middle East.

Reuters:

• Goldman(GS) to Face Mortgage Debt Class-Action Lawsuit. Goldman Sachs Group Inc was ordered by a federal judge to face a securities class-action lawsuit accusing it of defrauding investors about a 2006 offering of securities backed by risky mortgage loans from a now-defunct lender. U.S. District Judge Harold Baer in Manhattan certified a class-action lawsuit by investors led by the Public Employees' Retirement System of Mississippi.
  

Financial Times:

• The Preferred, Puzzling, ESM.

Financial Times Deutschland:

• Euro-area central banks may be prepared to take losses on the Greek bonds they hold that aren't part of the European Central Bank's asset-purchase program, citing "euro sources".

China Economic Times:

• China should pay attention to the risk that some local governments may default on their debt, Meng Chun, researcher at the State Council's Development Research Center wrote today.
• China's increase in energy demand may slow this year as economic growth slows, Deng Yusong, a researcher at the State Council's Development Research Center wrote today. Growth of exports, real estate investment and manufacturing investment may decline "substantially" this year from 2011, Deng writes.
  

Bear Radar

Style Underperformer:

• Large-Cap Value +1.19%

Sector Underperformers:

• 1) HMOs -1.39% 2) Gold & Silver -.88% 3) Gaming +.01%

Stocks Falling on Unusual Volume:

• HNT, WYNN, IGT, EGO, RGLD, EL, CNQR, SIMO, IDIX, AMLN, VRTX, ACHN, MOD, KEX, CNW and EW
  

Stocks With Unusual Put Option Activity:

• 1) ZNGA 2) APKT 3) RIO 4) NOV 5) HYG
  

Stocks With Most Negative News Mentions:

• 1) APKT 2) VRTX 3) N 4) MRO 5) WYNN
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.90%

Sector Outperformers:

• 1) Networking +3.53% 2) Homebuilding +3.12% 3) I-Banking +3..06%

Stocks Rising on Unusual Volume:

• DRIV, FCS, CMA, TTWO, AIXG, UBS, URBN, ZOLT, APKT, CTCT, HTGC, SIMO, ABMD, GILD, COLM, TRMB, BVSN, SNE, ZOLT, XXIA, ZNGA. RDK, TEN, TRMB, WBC, PJC, TSN, WHR, KNXA, POWI, RHI, SCHW, BGC, CMI, OMCL, BC, KEM, BSFT, CMA, ROC, AMP and PKI
  

Stocks With Unusual Call Option Activity:

• 1) APKT 2) MAS 3) GT 4) ZNGA 5) PXD
  

Stocks With Most Positive News Mentions:

• 1) GILD 2) URBN 3) BA 4) MA 5) JOYG
  

Charts:

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

Friday Watch

Evening Headlines
Bloomberg:

• Greece Aiming to Close Swap in Second Bailout Faces Fight to Stay in Euro. Greece’s fight to win its second international bailout may only open a new chapter in its struggle to remain in the euro area. The rescue plan, which European officials and Greek creditors say may be wrapped up in coming days, includes a loss of more than 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table. That won’t stanch the bleeding, say economists including Holger Schmieding of Berenberg Bank in London. Greece will be saddled with too much debt, too little growth and too large a budget hole to do without even more money that euro nations led by Germany are increasingly reluctant to offer, they say. “Greece is in deep trouble,” Schmieding said in a Jan. 30 report. “The current Greek adjustment program is failing. Excessive austerity, a lack of supply-side reforms, administrative incompetence and political deadlock have pushed the Greek economy into an apparent death spiral. More of the same will not work.” As Greek officials negotiate with representatives of the so-called troika -- the European Commission, European Central Bank and International Monetary Fund -- Deutsche Bank AG Chief Executive Officer Josef Ackermann may travel to Athens this weekend for talks over a swap involving Greek debt with a face value of about 200 billion euros.
  
• Europe's Leaders Shouldn't Sacrifice Union to Save Common Currency: View. The euro-area crisis is forcing many of the European Union’s long-running political disputes to the surface at the same time. As they wrestle to save the currency, Europe’s leaders -- above all Britain’s David Cameron, France’s Nicolas Sarkozy and Germany’s Angela Merkel -- need to make sure they don’t dismantle the union in the process.
• China Restricts Mortgage Loans for Overseas Buyers to Cool Property Prices. China will limit mortgage loans for home purchases by foreigners to stem overseas investment in its property market as part of efforts to cool prices. The nation’s planning agency won’t approve medium- and long-term foreign debt quotas for overseas banks in 2012, if they intend to use such borrowings to fund mortgages taken out by foreigners, the National Development and Reform Commission said in a statement. Premier Wen Jiabao this week reiterated that the government will maintain curbs on the property market to bring prices down to a reasonable level. China last year increased down-payment requirements and mortgage rates on some homes and imposed housing purchase restrictions in about 40 cities.
• Fisher Calls Fed's Target Forecasts Misguided 'Guesswork'. Federal Reserve Bank of Dallas President Richard Fisher described policy makers’ forecasts for the central bank’s main interest rate as little more than speculation. “These are not binding commitments,” Fisher said today in a speech in Austin, Texas. Fed officials’ projections for the economy and interest rates are “largely guesswork, especially looking out over a multiyear period.” The Fed on Jan. 25 released federal funds rate forecasts by policy makers for the first time and extended its pledge to keep rates near zero at least through late 2014. Chairman Ben S. Bernanke today acknowledged improvement in some recent economic data while cautioning that the economy still faces risks, including fiscal deficits that in the long-run must be reduced. Fisher, who doesn’t vote on policy this year, has been among the most vocal critics of Fed easing, dissenting last year twice against moves to push down long-term rates and to keep the benchmark U.S. interest rate near zero until at least mid-2013. He voted five times in 2008 in favor of tighter policy and said today he opposes the 2014 interest rate pledge. “I resisted the notion of a need for a statement indicating that monetary accommodation be tied to a specific date, be it in mid-2013, late 2014 or any other,” Fisher said in a speech to the Headliners Club. “Instead, I feel that the key should be to calibrate monetary policy according to the state or condition of the economy.” The Dallas Fed leader told reporters after his speech that recent U.S. economic reports have been “pretty good,” and that he opposes additional Fed asset purchases to stimulate growth. “I don’t see how you could justify it given the status of the current economy,” he said. “Is it needed? I don’t think so. Secondly, it compounds the difficulty of an exit when the right time comes.” Monetary policy easing may not be effective in bolstering the labor market, Fisher said. Still, “accommodation will be in place until the economy gathers sufficient steam,” he said. “It is slowing gathering but it is slow.” In his prepared remarks, Fisher repeated his concern that monetary policy alone could do little to reduce U.S. unemployment, saying fiscal and regulatory policies have impeded job creation. Texas was one of three states that have regained jobs lost during the past recession, as well as North Dakota and Alaska, he said. “To the extent that inflation is running below 2 percent, the Federal Reserve may have somewhat greater latitude to pursue accommodation,” Fisher said. “However, the past few years have demonstrated, yet again, that allowing inflation to rise by no means guarantees faster job growth.”
• Banks Join Pensions in Squeeze as Federal Reserve's Low Rates Erode Profit. The Federal Reserve, which cut its target for the federal funds rate to a zero-to-0.25 percent range on Dec. 16, 2008, said last month that rates would remain “exceptionally low” at least through late 2014. While the unprecedented period of near-zero rates is meant to aid an ailing economy, it poses challenges for banks, insurers, pension funds, and savers. The hope is that by making mortgages and other loans cheaper, ultra-low rates eventually may revive economic growth, Bloomberg Businessweek reports in its Feb. 6 issue. For now they’re squeezing profits at banks and disrupting investment strategies at insurance companies and pension funds. They’ve reduced payouts on savings accounts and bonds, and may lead to higher bank fees and insurance premiums. “For most people, there’s been more downside to these low rates than upside,” says Barry Ritholtz, chief executive officer of FusionIQ, a New York-based investment research firm. “They’ve punished savers and people living on fixed income, and made insurance more expensive.”
• Kyle Bass Urges Texas Fund to Hold Gold Hedge as Assets Shrink. Kyle Bass, the Dallas hedge-fund manager, urged overseers of Texas’s state university endowment, the second-largest U.S. college fund, to stick with a $1 billion investment in gold bullion even as the fund’s assets decline. “I’m against selling any of the gold,” Bass said today at a meeting of fund directors in Austin, citing the need for a hedge against mounting risks driven by government deficits in the U.S. and Europe. “As every day goes by, I see deflation in the things you own and inflation in the things you need.
• MF Futures Customers Compete to Lead Lawsuit Against Corzine. MF Global Inc. futures customers are competing to lead a lawsuit against Jon Corzine, the parent company’s former chief executive officer, over the alleged theft of $1.2 billion of their assets. Court filings show at least seven actions against Corzine by futures customers in Manhattan federal court. Plaintiffs who’ve nominated themselves to lead a potential group suit include Sapere CTA Fund LP, which sued Corzine and other former MF Global Holdings Ltd. executives for $90 million; Seattle money manager William Fleckenstein along with Kay P. Tee LLC, a firm with a trading account at MF Global; and, together, Davide Accomazzo and Roberto Calle Gracey, who said in court papers they filed the first action on behalf of futures customers.
• Geithner Says Systemically Risky Firms to Be Named in 2012. U.S. Treasury Secretary Timothy F. Geithner said the first non-bank financial companies deemed systemically risky will be named this year, and the department will release more plans for an overhaul of housing finance.
• U.S. Senate Adopts Measure to Ban Bonuses at Fannie, Freddie. The U.S. Senate passed a prohibition on executive bonuses at Fannie Mae and Freddie Mac, the government-controlled mortgage companies that are dependent on taxpayer aid. The Senate voted 96-3 to approve a bill including the ban proposed by Republican John McCain of Arizona and Democrat John Rockefeller of West Virginia, which was added by voice vote earlier today. The measure was introduced after the companies’ regulator, the Federal Housing Finance Agency, approved nearly $13 million in bonuses to 10 executives. McCain, on the Senate floor this week, said he found it “hard to believe” it would be difficult to find people to run the firms “without the incentive of multi-million dollar bonuses.” “There are many examples of intelligent, well-qualified, patriotic individuals working in our federal government who make significantly less than the top executives at Fannie and Freddie with just as much responsibility,” McCain said.
• Japan Inc. Suppliers Cut Jobs as Yen Batters TV, Chip Profit. Japan Inc. is suffering and the supply chain is bearing the cost. The yen's 7 percent surge against the dollar in the past 12 months has widened losses at Sony, Mazda and Sharp Corp., which plans to halve TV production at its biggest factory to reduce inventory. Manufacturers have been forced to both relocate production outside of Japan and to press their suppliers for cost cuts.
• Wynn Macau Profit Misses Analysts' Estimates on Competition. Wynn Macau Ltd., the Hong Kong-listed casino unit of Wynn Resorts Ltd.(WYNN), missed analysts estimates for its full-year profit on rising competition in the world’s largest gambling hub. Fourth-quarter net income rose 15 percent to $239.9 million from $208.8 million a year earlier, the company said in a statement to the Hong Kong stock exchange. Based on numbers derived from the statement, full-year profit was $759.8 million, missing estimates of $795.3 million from 16 analysts surveyed by Bloomberg. Competition is increasing in Macau, the only place in China where casinos are legal, as Sands China Ltd. and other operators build more gaming centers to tap surging numbers of Chinese gamblers. Sands China Ltd., controlled by Sheldon Adelson’s Las Vegas Sands Corp.(LVS), this week posted annual profit that beat analysts’ estimates. “Wynn’s performance was weak relative to the market,” Macquarie Securities analyst Gary Pinge said in a report. The brokerage downgraded the stock to underperform and cut its share price target to HK$17 from HK$17.50.

Wall Street Journal:

• Futures on Credit-Default Swaps Seen as Natural Evolution. Efforts to create an exchange-traded futures contract tied to credit-default swaps haven't yet gained traction after 18 months of talks, but banks dealing in the private multitrillion-dollar market for credit derivatives believe such contracts will eventually appear for a simple reason: They should attract new players. Dealers have long been fiercely protective of keeping the status quo in credit-default swaps or "CDS" because they have booked fat profits from customers not being able to see where other customers are trading. But dealers believe that opening up the market with a futures contract could bring in a more diverse user base, and that they could make up for thinner margins with larger volumes. Dealers' proposed futures contracts would track the performance of a basket of CDS, allowing investors to trade around the expected future value of that default protection on a range of companies. The most commonly traded CDS indexes are the CDX North America Investment Grade index and the iTraxx Europe, both administered by Markit, which also has been involved in the dealer talks. The notional amount of CDSs rose 8% in the first half of last year to $32.4 trillion, according to the Bank for International Settlements, and as of the end of June 2011 represented about 5% of the $708 trillion swaps market.
• U.S. Fears Iran's Links to al Qaeda. U.S. officials say they believe Iran recently gave new freedoms to as many as five top al Qaeda operatives who have been under house arrest, including the option to leave the country, and may have provided some material aid to the terrorist group. The men, who were detained in Iran in 2003, make up al Qaeda's so-called management council, a group that includes members of the inner circle that advised Osama bin Laden and an explosives expert widely considered a candidate for a top post in the organization.
• Senate Passes Insider-Trading Ban. After years of delay, Congress took a big step toward approving new rules to ban lawmakers from trading stocks based on information they pick up in the halls of Capitol Hill—a move aimed in part at helping repair the institution's low approval ratings. The Senate voted overwhelmingly, 96-3, to pass the legislation, called the Stop Trading On Congressional Knowledge Act, or Stock Act. The bill now moves to the House, where Republican leaders said they would vote on it next week.
• Swiss Bank Wegelin Indicted on U.S. Tax Charges. U.S. prosecutors filed criminal charges against Switzerland's oldest bank, alleging it helped wealthy Americans hide more than $1.2 billion in secret accounts abroad, the latest move in an ongoing crackdown on overseas tax evasion. The indictment of Swiss private bank Wegelin & Co., founded in 1741, marks the first time U.S. authorities have charged a bank rather than individuals with helping Americans evade taxes.
• Banks Depleting Earnings Backstop. The rainy-day funds that U.S. banks have been tapping to boost their earnings could soon begin to dry up, and that doesn't bode well for bank profits. Many banks have been "releasing" reserves against bad loans since the worst of the crisis passed and the economy began recovering. That money flows to the bottom line, helping some banks boost earnings at a time when lending and trading profits have been soggy.

Business Insider:

• Incredible Photos From The Brutal Cold Front That's Killed Over A Hundred In Europe.

Zero Hedge:

• 4-Wk Avg NYSE Volume Lowest Since 1999. (graph)
• Morgan Stanley(MS) Cuts EURUSD Forecast From 1.20 To 1.15 On Upcoming ECB Easing.
• Europe's "Great Deleveraging" Has Only Just Begun. (graph)
  

CNBC:

• Fed Policy 'Too Loose For Too Long': Rep. Ryan. The U.S. is "limping out of this recession" at growth of 1.7 percent thanks to Federal Reserve policy that has been "too loose for too long," Rep. Paul Ryan, R.-Wis., chairman of the House Budget Committee, told CNBC.
  

FINalternatives:

• Hedge Funds Add 1.34% To Start Year, Credit Suisse Index Shows. Four of the five strategies tracked by the LAB indices posted gains, led by long/short, which rose 2.57%, and event-driven, which added 2.14%. Global strategies rose 0.59% and merger arbitrage 0.49%, while managed futures lost 0.27% on the month.

Reuters:

• Weak Customer Spending Hurts Acme Packet(APKT) Outlook, Shares Fall. Network gear maker Acme Packet Inc reported fourth-quarter results below analysts' expectations and forecast a weak full-year profit as its customers scaled back on spending and delayed orders. Acme Packet shares slid 12 percent to $27.17 in after-market trade on the Nasdaq.

Financial Times:

• Deutsche Bank Concerned by Offer of ECB Loans. Deutsche Bank has risked a clash with the European Central Bank by indicating it sees a stigma attached to the long-term help offered to banks to try to ease the eurozone’s funding crisis. Josef Ackermann, chief executive, made clear that Deutsche might not take up the ECB’s next offer of unlimited three-year loans because it might be seen as tantamount to government aid that could damage the bank’s reputation.

Telegraph:

• Eurozone Bail-Out Funds Not Enough, Warns OECD. International debt inspectors believe they have found another €15bn (£12.5bn) black hole in Greece’s public finances caused by the deepening recession, delivering the crippled nation another devastating blow. With pressure growing over talks with private investors about the terms of a €100bn debt write-off, officials calculated that to bring the country’s debts to a sustainable level at 120pc of GDP the international community would need to find an extra €15bn, raising the prospect of a Greek default. Sources told news organisations in Brussels that weak growth will make it even more difficult for Greece to resolve its debt problem, leaving the eurozone and the International Monetary Fund with the prospect of an even larger bail-out than the €130bn planned. The warning came as the Organisation for Economic Co-operation and Development (OECD) said the emergency bail-out funds are not big enough. The international think-tank said the European Financial Stability Facility’s (EFSF) €440bn (£366bn) firepower “is not enough” to support the lending requirements of indebted countries, particularly given that it “has not found it easy to raise funds with low yields”. Greece, Portugal, Italy, Ireland and Spain need to repay a total of €700bn this year and €400bn next year.
• Oil Price Could Fall to $70 in 2012 Amid Volatility, Shell Warns. Oil prices could fall to $70 a barrel during 2012, from current levels above $110, as high volatility in the economy and energy markets becomes "a fact of life", Royal Dutch Shell executives said.

Globe and Mail:

• Ottawa Leans on Banks to Tighten Lending. Ottawa is becoming increasingly uncomfortable with record-low mortgage rates being offered by some Canadian banks and the ease with which some institutions are advancing lines of credit. Finance Department officials raised concerns with bankers in recent weeks about historically low mortgage rates as well as lending standards, industry sources said Thursday. After warning for several months about the debt levels of Canadian households, government officials were upset that banks continued to reduce rates and make a bigger push on home loans.

People's Daily:

• China should prevent using wealth accumulated to overspend on luxury goods, according to a commentary published on the People's Daily today written by Jiang Hongbing.

Evening Recommendations
Citigroup Global Markets:

• Reiterated Buy on (ACE), boosted estimates, target $81.
• Reiterated Buy on (DOW), target $39.

Night Trading

• Asian equity indices are -1.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 172.0 -2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 141.50 -2.25 basis points.
• FTSE-100 futures +.13%.
  
• S&P 500 futures -.01%.
  
• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AXL)/.39
• (CLX)/.69
• (EL)/1.01
• (TSN)/.34
• (WY)/.07
• (BRO)/.22
• (SPG)/1.91
• (BAH)/.38
• (AON)/.96
  

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for January is estimated at 140K versus 200K in December.
• The Unemployment Rate for January is estimated at 8.5% versus 8.5% in December.
• Average Hourly Earnings for January are estimated to rise +.2% versus a +.2% gain in December.

10:00 am EST

• ISM Non-Manufacturing for January is estimated to rise to 53.2 versus 52.6 in December.
• Factory Orders for December are estimated to rise +1.5% versus a +1.8% gain in November.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The (STJ) Investor Meeting could also impact trading today.
  

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

Stocks Slightly Higher into Final Hour on More Financial/Tech Sector Optimism, Lower Energy Prices, Short-Covering, Less Eurozone Debt Angst

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Mixed
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.16 -2.10%
  
• ISE Sentiment Index 100.0 -6.54%
  
• Total Put/Call .87 +3.57%
  
• NYSE Arms .93 +12.31%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 99.89 +.58%
  
• European Financial Sector CDS Index 169.77 -3.20%
  
• Western Europe Sovereign Debt CDS Index 330.22 -.75%
  
• Emerging Market CDS Index 261.32 -.15%
  
• 2-Year Swap Spread 26.0 -2 bps
  
• TED Spread 45.0 -3 bps
  
• 3-Month EUR/USD Cross-Currency Basis Swap -69.0 +4.5 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .08% +3 bps
  
• Yield Curve 160.0 -2 bps
  
• China Import Iron Ore Spot $143.10/Metric Tonne +.21%
• Philly Fed ADS Real-Time Business Conditions Index .0768 -.78%
  
• Citi US Economic Surprise Index 49.50 -.4 point
  
• 10-Year TIPS Spread 2.14 +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +9 open in Japan
• DAX Futures: Indicating +1 open in Germany

Portfolio:

• Slightly Higher: On gains in my Biotech, Medical and Tech sector longs
  
• Disclosed Trades: Added to my (IWM), (QQQ) hedges and then covered some of them
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 tests last week's high on falling Eurozone debt angst, more financial/tech sector optimism, falling energy prices and gains in overseas equities. On the positive side, Coal, Alt Energy, Oil Service, Networking, Homebuilding, Gaming and Airline shares are especially strong, rising more than +1.0%. Financial and Tech shares are outperforming again. Oil is falling -.75%. Oil continues to trade poorly given the stock rally, euro rally, rising interest from speculators, falling euro debt angst, subsiding emerging market hard-landing fears, improving US data and Mid-east tensions. Major Asian indices rose around +1.0% overnight, led by a +2.0% gain in Hong Kong shares. I think investors have gotten a bit carried away with stocks in the region as slowing growth and stubbornly high inflation remain significant issues. Major European indices are up around +.5%, led by a .87% gain in Spanish shares. The Bloomberg European Bank/Financial Services index is up +1.1%. Investors continue to price in a European debt crisis “can-kicking” and a stabilization/improvement in economic activity in the region. While this optimism could last awhile longer, I still expect further economic contraction as more austerity measures take hold over the intermediate-term. The Portugal sovereign cds is falling -4.2% to 1,317.22 bps, the France sovereign cds is down -2.94% to 169.32 bps and the Japan sovereign cds is down -2.54% to 133.39 bps. Moreover, the European Investment Grade CDS Index is falling -3.1% to 122.40 bps. On the negative side, Oil Tanker, Defense, HMO and Education shares are under pressure, falling more than -.75%. The Transports are also underperforming. Copper is dropping -1.33%, Lumber is down -.8% and Gold is rising +.95%. The Italy sovereign cds is rising +.42% to 393.95 bps, the Russia sovereign cds is gaining +1.52% to 220.67 bps and the Brazil sovereign cds is rising +.61% to 141.85 bps. The Portugal sovereign cds is up +23.7% in 14 days and near its recent all-time high. Lumber has declined -7.1% since its Dec. 29th high despite the better US economic data, more dovish Fed commentary, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the Baltic Dry Index has plunged over -60.0% from its Oct. 14th high and is now down over -50.0% ytd. The 10Y T-Note Yield is flat at 1.82%, which remains a large concern considering the recent stock rally, falling Eurozone debt angst and improvement in US economic data. The Philly Fed’s ADS Real-Time Business Conditions Index has stalled over the last 3 weeks after showing meaningful improvement from mid-Nov. through year-end. The Western Europe Sovereign CDS Index is still fairly close to its Jan. 9th all-time high. The TED spread, 2Y Euro Swap Spread, 3M Euribor-OIS spread and Libor-OIS spread have improved, but are still at stressed levels. China Iron Ore Spot has plunged -21.0% since Sept. 7th of last year. Shanghai Copper Inventories are up over +300.0% ytd to the highest level since March of last year. The AAII % Bulls fell to 43.81, while the % Bears rose to 25.08 this week. Overall, investor sentiment gauges are still registering too much complacency given the macro backdrop. Several key market-leading stocks have stalled of late. I still believe that a more cautious approach is warranted in the short-term given that several key investor sentiment gauges are registering too much complacency, stocks are technically extended, global growth is still slowing and some market-leaders are stalling. For an intermediate-term equity advance from current levels, I would still expect to see further European credit gauge improvement, subsiding hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. One of my longs, (ISRG), hit a new all-time high on volume today. The stock is extended short-term, but I still expect significant outperformance over the intermediate-term. I expect US stocks to trade mixed-to-higher into the close from current levels on more tech/financial sector optimism, short-covering, declining Eurozone debt angst and lower energy prices.

Today's Headlines

Bloomberg:

• Greece Seen as Struggle Even After 2nd Rescue. Greece, struggling to seal agreement on a second rescue from creditors in coming days, will remain at risk of abandoning the euro, say economists including Holger Schmieding of Berenberg Bank. Greece may stay saddled with too much debt, too little economic growth and too large a budget hole to do without yet more aid that euro nations led by Germany are increasingly reluctant to offer. Deeper spending cuts required for extra loans of at least 130 billion euros ($170 billion) and domestic resistance to overhauling the economy risk limiting the impact of any second aid package, the economists say. The deal is also slated to include a 50 percent cut in the face value of more than 200 billion euros of Greek debt through a voluntary exchange by private creditors of outstanding bonds for new securities. “Greece is in deep trouble,” Schmieding, chief economist at Berenberg in London, said in a Jan. 30 report. “The current Greek adjustment program is failing. Excessive austerity, a lack of supply-side reforms, administrative incompetence and political deadlock have pushed the Greek economy into an apparent death spiral. More of the same will not work.” Greece remains in intensive care more than two years after triggering Europe’s debt crisis, testing the patience of other European Union nations. Last November, when discussing the Greek situation, French President Nicolas Sarkozy and German Chancellor Angela Merkel for the first time raised the prospect of a country’s exit from the euro.
• Spanish Unemployment Grows Most in Three Years as Recession Looms: Economy. Spanish unemployment registrations jumped by the most in three years in January as the economy edged into its second recession since the end of 2009. The number of people signing on for jobless benefits increased by 177,470 to 4.6 million, the Labor Ministry in Madrid said in an e-mailed statement today. That was the biggest increase since January 2009 and the total is the most since records began 16 years ago. Data last week showed overall unemployment in the fourth quarter reached a 15-year high. “For countries like Spain and Italy, where the fiscal tightening in the pipeline this year is immense already and there will be more to come, we do have concerns about significant contraction in output,” said Chris Scicluna, head of economic research at Daiwa Capital Markets Europe in London.
• 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 five basis points to 321 basis points at 8 a.m. in London, the lowest since Dec. 5. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased five basis points to 580, the lowest since Aug. 8, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell one basis point to 135.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 2.5 basis points to 207 and the subordinated index dropped four to 358.
• Barclays Plans 25% to 30% Pay Cut for Bankers. Barclays Plc (BARC), the British lender run by Robert Diamond, plans to cut compensation for the 24,000 employees at its investment banking unit by as much as 30 percent, two people with knowledge of the talks said. The lender is preparing to tell employees at Barclays Capital next week that overall pay will be down by 25 percent to 30 percent on average from a year earlier, said the people, who declined to be identified because the plans haven’t yet been made public. The bank will also eliminate about 5 percent of its senior bankers, said the people. Those at risk typically hold titles such as executive directors and managing directors.
• Jobless Claims in U.S. Fell Last Week. Applications (INJCJC) for unemployment insurance payments dropped by 12,000 to 367,000 in the week ended Jan. 28, according to Labor Department figures issued today in Washington. Worker output per hour increased at a 0.7 percent annual rate from October through December, down from a 1.9 percent gain in the prior three months, another report showed.
• Oil Declines to Six-Week Low as U.S. Inventories Climb Amid Weak Demand. Oil fell to a six-week low in New York as U.S. supplies climbed and fuel demand tumbled. Brent crude in London traded at the biggest premium to the American benchmark grade in 12 weeks. Futures declined for a fifth day after the Energy Department reported yesterday that crude supplies in the U.S. rose to a three-month high last week. Total fuel use dropped 8.3 percent to 17.7 million barrels a day, the least since 1999. Tension over Iran’s nuclear program may ease after United Nations inspectors announced more talks in Tehran. “The market is looking heavy because supplies are rising and demand is very weak,” said Phil Flynn, an analyst at PFGBest in Chicago. “A major reason for the recent rise in prices was concern about Iran. The hyperbole about the Iranian situation has calmed down.” Crude oil for March delivery declined $1.84, or 1.9 percent, to $95.77 a barrel at 12:49 p.m. on the New York Mercantile Exchange. Futures dropped to $95.44, the lowest level since Dec. 20. Prices are down 3.1 percent this year. Gasoline consumption decreased to 7.97 million barrels a day, the lowest level since September 2001, according to Energy Department data. Stockpiles of the fuel increased 3.02 million barrels last week, the report showed yesterday. “Gasoline supplies rose 3 million barrels even though production was down because demand is so weak,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “Demand looked weak across the board, which is going to weigh on the entire U.S. energy complex,” Wittner said. “It’s now February and refineries have already started planned maintenance, which explains the rise in Cushing supplies.” Refineries operated at 81.8 percent of capacity, down 0.4 percentage point from the week before. It was the lowest operating rate since May. Units are often idled for maintenance in February as attention shifts away from heating oil and before gasoline use rises. OPEC output in January rose to the highest level in more than three years, led by a rebound in Libyan output, a Bloomberg News survey showed on Jan. 31. Production (OPCRTOTL) increased 183,000 barrels, or 0.6 percent, to an average 30.9 million barrels a day in January.
• Gold Futures Climb to Eight-Week High. Gold futures for April delivery gained 0.5 percent to $1,757.60 an ounce at 10:37 a.m. on the Comex in New York. Prices earlier reached $1,758.10, the highest since Dec. 8. The metal climbed 11 percent last month, the biggest January rally since 1983.
• Facebook(FB) Punters Put Shares at $35 Each. The odds are pointing to Facebook Inc. pricing its IPO at between $35 and $44.99 a share in the $5 billion initial public offering it filed for yesterday, according to the Irish bookmaker Paddy Power Plc. (PAP) Facebook, based in Menlo Park, California, will price the new shares within that range at odds of 10 to 11, according to an e-mailed statement from Paddy Power. The likelihood of the social networking firm selling shares as low as $25 stands at 7 to 2, and at 9 to 2 for prices of more than $65, the gambling company site said.

Wall Street Journal:

• Fitch's Riley Says Euro-Zone Crisis To Persist Another 12-18 Months. The sovereign debt crisis in Europe will persist for "at least" another year, the head of sovereign ratings at Fitch Ratings said during a conference here Thursday. "This is going to be a long hard slough that will be punctuated with extreme market volatility," said Fitch's David Riley. The New York-based debt-rating firm believes it will take "at least 12 to 18 months before we have stabilization for the euro zone," Riley said. Italy, the euro-zone's third-largest economy, is a core country, Riley said. It also has the region's largest sovereign bond market. "It is too big to fail," because if it did it would undermine confidence and stability in the euro, he said. Riley said the question then becomes if Italy is too big to rescue. The country must roll over about EUR200 billion this year. "The challenge (for Italy) is to shift expectations" not only by delivering on its fiscal plan for a balanced budget, but also its ability to grow, he said.
  
• Feds Disclose New 401(k) Rules.
• The Really Negative Story on Natural Gas. Natural-gas prices are on the floor. Could they go negative? The probability that wholesale gas prices will drop below $2 per million British thermal units, from today's almost $2.50, is rising. Gas hasn't closed below $2 since September 2009. Today's market shares one critical similarity to then: bulging gas inventories. This overhang of excess supply could crash prices even further this spring.
  

CNBC.com:

• Change US Tax Code, Business Will Invest: FedEx(FDX) CEO.
• Retailers Post Mixed Results for January Sales.
• Worst Yet to Come for China Growth: Official Think Tank.
• Moody's Sees Negative Ratings Trend for Asian Firms.
  

Business Insider:

• Ugh: Ben Bernanke Says The Worst Possible Thing In His New Testimony.
• The Moment Eric Holder Almost Lost It During Testimony Today.
  (video)
• Berkshire Hathaway's $5 Billion Investment in Goldman Sachs(GS) in 2008 Has Resulted in a 50% Return.
• Facebook(FB) Is A Miracle of Capitalism.
  

Zero Hedge:

• Israel Accuses Russia of Supporting Iran Terror Organizations, Says Iran Has Enough Material For 4 Nuclear Bombs.
• European Hope Versus Global Growth Risk, Goldman(GS) Quantifies Anxiety.
• ECB Dollar Swaps With New York Fed Jump To Highest Since 2009, Surpass Recent Liquidity Crisis Highs. (graph)
• Under Twist, The Fed Has Purchased 91% Of All Gross Issuance In Long-Dated US Treasurys.
  

Washington Examiner:

• Obama's Economic Approval Just 36%. In another indication of the difficulty President Obama's reelection campaign faces, only 36 percent of likely voters grade the administration's handling of the economy at good or excellent, according to a new Rasmussen poll. In a national survey of 1,000 likely voters January 31-February 1, a whopping 62 percent grade the president at fair to poor, with poor collecting the largest number: 45 percent.

Miami Herald:

• Florida Senate Considers Taxing Internet Sales. Florida lawmakers took the first step Thursday toward joining the ongoing national battle to force online retailers to start collecting sales taxes. A state Senate committee agreed to introduce a bill (SB 7206) that would require online retailers such as Amazon.com to collect the state's 6 percent sales tax if the retailer has a warehouse or provides commissions to Florida residents who direct customers to the website. Those backing the bill say they aren't trying to generate more money for the state but that they are supporting it to help merchants in Florida who are losing out to online retailers that don't collect sales taxes.
  

Reuters:

• Spain Under Pressure After Auction; Greece Eyed.
• MasterCard(MA) Shrugs Off Litigation Charge, Posts Strong Q4.
  

Telegraph:

• Gold Will Rise Against 'Heavily Debased' Currencies.
• Debt Crisis: Live.