Today's Headlines

Bloomberg:

• Euro Finance Chiefs to Meet as Greece Pushes For Deal. Euro-area finance ministers are due to hold an emergency meeting in Brussels tomorrow as the Greek government pushes to complete talks on terms of a rescue. The policy makers, to be joined by International Monetary Fund chief Christine Lagarde, will convene at 6 p.m., according to a statement today by Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of finance chiefs from the 17- nation euro area. That gathering will follow the monthly meeting of the European Central Bank’s governing council in Frankfurt and an assembly of Greek creditors in Paris. While no information was provided about the ministers’ agenda, the scheduling suggests policy makers, who have to ratify a Greek accord, were optimistic about negotiators reaching an agreement in Athens.
• Merkel Austerity Called Counter-Productive by French Socialists. Germany’s push to treat Europe’s financial crisis with austerity may backfire by stifling its exports to the euro area, says Jerome Cahuzac, economic adviser to France’s Socialist presidential candidate. “No country in Europe will obtain balanced budgets without growth,” Cahuzac, a lawmaker who also heads the Finance Committee at the lower chamber of Parliament, said in an interview in Paris Feb. 1. “It is also in the interest of Germany that growth resumes everywhere and not just in Germany.” His comments underscore the schism between Francois Hollande, the Socialist candidate who leads President Nicolas Sarkozy in polls, and policy makers in Berlin. Hollande has vowed to renegotiate the German-inspired treaty tightening budget rules endorsed by 25 European Union leaders last month, saying it is biased against economic growth. “A Hollande government might be on a collision course with Germany,” George Magnus, senior economic adviser at UBS AG, said in an e-mailed note Feb. 6 that pointed to the increasing chance of a Hollande victory in the voting that concludes with a runoff on May 6.
  
• Sovereign Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and bank debt rose, reversing an earlier decline, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index linked to 15 governments rose from a three-month low, climbing three basis points to 321 at 2:30 p.m. in London. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed four basis points to 196, according to JPMorgan Chase & Co. The subordinated gauge was four basis points higher at 336. Contracts on the Markit iTraxx Crossover Index of 50 European companies with mostly high-yield credit ratings fell one basis point to 552.5, JPMorgan prices show. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 0.25 basis point to 129 basis points.
• U.S. Faces Downgrade If No Plan: Chambers. The U.S., lacking a plan to contain $1 trillion deficits, faces the prospect of another rating cut in six to 24 months depending on the outcome of November elections, according to John Chambers of Standard & Poor’s. America has had an AA+ rating with a negative outlook since Aug. 5 when the New York-based unit of McGraw-Hill Cos. stripped the nation of its AAA ranking for the first time, citing the government’s failure to agree on a path to reduce deficits. The U.S. has a one-in-three chance of another downgrade, Chamber said today during an S&P sponsored Webcast. “What the U.S. needs is not so much a short-term fiscal tightening, but it has to have a credible medium-term fiscal plan,” said Chambers, managing director of sovereign ratings. “That is going to have to say something about entitlements, and that is probably going to have to say something about revenues.”
• Bad Home Loans Top $72 Billion in 'Colossal Failure': Mortgages. Costs from faulty mortgages and shoddy foreclosures have topped $72 billion at the biggest U.S. banks as they near a settlement of a 50-state probe into the industry’s practices. Wells Fargo & Co., Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Ally Financial Inc., the five largest home lenders during the real estate boom, tallied at least $6.78 billion in new costs tied to mortgages during the second half of 2011, according to data compiled by Bloomberg. Bank of America, ranked second among U.S. banks by assets, contributes $41.8 billion of the overall total.
• Mortgage Bonds in Eye of Storm as Refis Decline: Credit Markets. Investors in U.S. government-backed mortgage bonds who benefited from a decline in early payoffs by homeowners are bracing for the fallout from a loosening of refinancing rules at Fannie Mae (FNMA) and Freddie Mac. Prepayments for Fannie Mae’s 30-year fixed-rate securities fell 8 percent last month to a pace that would erase 21.6 percent of the debt in a year, the slowest since September, data released Feb. 6 by the Washington-based company show. Refinancing damages securities that trade for more than face value by returning principal faster at par and curbing interest. An expansion of the Home Affordable Refinance Program urged by President Barack Obama is set to boost speeds by 1 or 2 percentage points each month, Barclays Capital analysts wrote in a report this week titled, “Calm Before the Storm.”
• Arabs Seek Safety in Dollars After Euphoria Fades. As he watched Egypt’s revolt turn into a financial crisis that devoured 50 percent of the nation’s foreign-currency holdings last year, Ahmed El-Rifai started charging some clients in U.S. dollars. The 32-year-old owner of Egyweb, a Web-development company in Cairo, says he may also buy real estate with his Egyptian pound savings, concerned that the loss of reserves will lead to a devaluation. That has already sent the pound down 3.8 percent since the start of last year. Iraq’s central bank says its dollars are fueling Syria’s black market. In Tripoli, Libya, dozens are queuing every morning at banks to buy the U.S. currency.
• YPF Argentine Unit Said to Boost Shale Oil Estimate to 23 Billion Barrels. Repsol YPF SA (REP)’s Argentine unit estimates its shale oil resources at the Vaca Muerta formation in the south of the country contain about 23 billion barrels, according to two people familiar with the situation. The unit previously announced resources of around 1 billion barrels.
• Jobless Decline Masks Drop in U.S. Labor Force. The unemployment rate’s unexpected drop to a three-year low has overshadowed a less-positive labor- market development: fewer Americans are looking for work. Last week’s Labor Department announcement that the jobless rate fell to 8.3 percent in January sent stocks and bond yields higher. The same report showed the share of working-age people in the labor force had declined to the lowest level in 29 years.
• Oil Fluctuates After U.S. Inventories Increase Amid Declining Demand. Oil fluctuated after the U.S. Energy Department reported that inventories climbed as fuel consumption dropped to the lowest level in almost 13 years. Futures slipped from the day’s highs after the department said crude supplies rose 304,000 barrels to 339.2 million in the week ended Feb. 3. Gasoline stockpiles increased to the highest level in almost a year and inventories of distillate fuels unexpectedly gained. Total fuel demand fell 0.5 percent to 17.6 million barrels a day, the lowest level since 1999. “We had supply builds in each of the major categories, while fuel demand remained impressively weak,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Traders seem reluctant to abandon the idea of oil in a perpetual uptrend, otherwise prices would be much lower.” Crude oil for March delivery fell 30 cents to $98.11 a barrel at 2 p.m. on the New York Mercantile Exchange. Prices are up 13 percent from a year ago.

Wall Street Journal:

• India Increases Iran Oil Imports. India increased its imports of Iranian oil to become the Islamic Republic's largest customer last month, largely offsetting a cut in Chinese purchases as sanctions fail to significantly dent Tehran's sales for now, people within the oil industry said this week.
• Turkey Seeks Pressure Group as Syria Pounds Homs. Turkey said Wednesday that it was seeking to form an international group on Syria "as soon as possible" to coordinate policy between regional players and world powers, as Syrian troops continued an attack on the city of Homs that activists said left at least 50 dead.

CNBC.com:

• Gas Prices in All 50 States Back Above $3 a Gallon.
• Government Bailout Actually Hurt Housing Recovery: Zell. Government intervention has prevented the real estate market from healing, with the commercial sector hit especially hard, investor Sam Zell said. As sales languish and prices continue to fall, the head of Equity Group Investments and numerous other ventures pinned the blame on policies that refused to allow market forces to take hold. "Rather than let the elements of the business world take care of the problems, we basically stopped the process of creating market clearing," Zell said in a CNBC interview. "Had we allowed the market to clear without trying to stop reality...we would have a healthy housing market today."
• Greece Keeps Promising Reform, but Few Believe It. Taxes go uncollected, deficit targets are routinely missed, job cuts from the state payroll are postponed, privatizations have barely begun and pharmacies are still shut in the middle of the day.

Business Insider:

• FAA: Look for 30,000 Drones To Fill American Skies By The End Of The Decade.
• States are Rebelling Against The Indefinite Detention Of American Citizens.
• 18 Staggering Charts On The Rise Of Government Dependence.
• Why I Don't Believe The European Crisis Is Over. (graph)
• Chris Matthews Calls Obama's War Against The Catholic Church 'Frightening'. (video)

Zero Hedge:

• European FX Swap Line Usage With NY Fed Rises To Fresh Multi-Year High as More Banks Demand More Dollars. (graph)
• Italian Recession Accelerating.
  

Reuters:

• Greek Debt Not Sustainable With 70% Haircut, Credit Conditions Deteriorating in Itlay, France: S&P. Greece will likely not achieve sustainable debt levels with a 70 percent reduction in the value of bonds held by its private creditors, Standard & Poor's warned on Wednesday, putting pressure on the official sector also to take losses. Private-sector bond holders currently account for only a small part of Greece's creditors since most of the country's debt has migrated to the hands of the European Central Bank and other official institutions, S&P analyst Frank Gill said in a webcast with clients. "In our original estimate, which was made two years ago, at that time debt-to-GDP would have been restored to a far more sustainable level," Gill said. "But because only a small subcomponent of investors are actually taking the haircut and the official sector is not, or only partially, then the reduction... is probably not sufficient debt relief to make debt sustainable given the outlook for GDP itself." S&P, which currently rates Greece at CC with a negative outlook, said it intends to downgrade the country to "selective default," but just temporarily, while the government concludes its debt swap. S&P also warned that credit conditions continue to deteriorate in Italy and France after it downgraded both countries last month, despite extraordinary steps by the ECB to boost liquidity in the market. "We still see credit conditions deteriorating in places like Italy, places like France, and that is going to weaken domestic demand," Gill said. "That makes it very difficult to project what the fiscal outcome is going to be this year in those countries."
• United Tech(UTX) CFO Warns of "Tough" First Quarter. United Technologies Corp Chief Financial Officer Greg Hayes hammered home the message on Wednesday that the world's biggest maker of elevators and air conditioners is having a difficult first quarter. "The first quarter is going to be tough," Hayes said at an investor conference in New York. "We've purposely said that so as not to surprise anybody when we report (first-quarter results) in April." Weak demand for its Carrier air conditioners and high expenses at the Pratt & Whitney jet engine unit will take a toll on results, Hayes added.

Imerisia:

• The Greek government's revenue from value-added tax totaled $2.85 billion last month, an 18.7% drop compared with January 2011, mainly due to increasing company closures.
  

Bear Radar

Style Underperformer:

• Small-Cap Growth -.70%

Sector Underperformers:

• 1) Restaurants -1.0% 2) Steel -.80% 3) Energy -.80%

Stocks Falling on Unusual Volume:

• WU, IRWD, PNRA, CSGS, DNDN, BBL, BMA, TEO, SGI, OPNT, OPEN, LPLA, NTGR, TTMI, CTSH, ZOLT, ULTI, IPCM, AREX, OYOG, MAKO, AAWW, PRGO, LOGM, VSAT, NLY, AEC, GWR, CRR, SLH, TTMI, DFT, WU, DFZ, SCX and ONE
  

Stocks With Unusual Put Option Activity:

• 1) CSC 2) RL 3) HIG 4) RSX 5) TSL
  

Stocks With Most Negative News Mentions:

• 1) LPX 2) ANLY 3) WU 4) SGI 5) GM
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value -.05%

Sector Outperformers:

• 1) HMOs +.73% 2) Semis +.55% 3) Disk Drives +.53%

Stocks Rising on Unusual Volume:

• RL, LVLT, SIMO, NVDA, KFRC, HCSG, SNCR, MDRX, AVID, BWLD, MITK, EZCH, CERN, SIMO, CSC, HIG, CALX, VSH, ICE, WYN, ALR and GME
  

Stocks With Unusual Call Option Activity:

• 1) RL 2) BWLD 3) GME 4) PRGO 5) OPEN
  

Stocks With Most Positive News Mentions:

• 1) MCD 2) BA 3) YUM 4) CERN 5) BWLD
  

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• Greek Haggling Drags on as Meeting to Seal Terms of Second Bailout Delayed. Greek Prime Minister Lucas Papademos is set to negotiate with leaders of the political parties supporting his caretaker government after Athens missed another deadline to secure a second aid package. Papademos will see the chiefs in Athens today after delaying the meeting for a second time in as many days while Greek officials and international creditors haggle over the terms. Late last night, he held an unscheduled meeting with the so-called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, to put the final touches on terms required for a 130 billion-euro ($172 billion) rescue package. Yesterday’s delay was yet another hitch in completing a package that’s been on the table since July. The government is struggling to arrange financing to avert a collapse of the economy, risking a new round of contagion in the euro area. With the country facing a 14.5 billion-euro bond payment on March 20, German Chancellor Angela Merkel warned this week that “time is running out” to reach an accord. The tussling in Athens threatens to hold up a critical element of the second financing package, that of a debt swap that will slice 100 billion euros off more than 200 billion euros of privately-held debt. The rescue blueprint includes a loss of more than 70 percent for bondholders in the voluntary debt exchange as well as loans that will probably exceed the 130 billion euros now on the table.
• Bond-Buying Japan Banks Snub Downgrade Threat: Chart of the Day. Japanese banks are ignoring the threat of more cuts to the nation's debt rating by boosting holdings of government bonds to a record, helping to prevent any jump in the country's borrowing costs. The value of Japanese debt held by domestic financial institutions, including commercial banks and insurance companies, reached $7.5 trillion at the end of September, according to the Bank of Japan.
  
• Iran Anxiety No Match for Central Banker Cash. Iran’s nuclear ambitions, Syria’s bloody crackdown and Greece’s potential default are leaving markets unfazed as central bankers take unprecedented steps to prevent the global economy from crumbling. The balance sheets of central banks in the U.S., Switzerland, U.K., European Union, Japan and China have swelled from a collective $4.99 trillion in May 2006 and $10.1 trillion in December 2008, two months after the collapse of Lehman Brothers Holdings Inc. spurred the worst financial crisis since the Great Depression, according to Bianco Research. China’s central bank holds about $4.5 trillion of securities, the most of any such institution in the world, Bianco Research’s data show. The ECB has about 2.7 trillion euros ($3.6 trillion) while the Fed holds $2.9 trillion, up from $898 billion in 2008.
• BHP Billiton(BHP) First-Half Profit Drops 5.5%. BHP Billiton Ltd., the world’s biggest mining company, reported a 5.5 percent drop in first- half profit, the first decline since 2009, as rising costs and lower output and prices halved base metals earnings. Net income was $9.9 billion in the six months ended Dec. 31, from $10.5 billion, a year earlier, the Melbourne-based company said today in a statement. That compares with the $10 billion average estimate of seven analysts surveyed by Bloomberg. Metal prices in London declined 20 percent in the half on reduced demand in Europe and slowing industrial production in China, the world’s largest metals buyer. BHP, which is spending $80 billion over the next five years to boost output of iron ore, copper and coal, remains “cautious” on the market outlook Chief Executive Officer Marius Kloppers told a conference call.
• Caesars(CZR) Fetches $1.13 Billion Market Value After Pricing IPO. Caesars Entertainment Corp., the casino chain saddled with more than $22 billion in debt, completed an initial public offering that gives the company a market value of $1.13 billion. Las Vegas-based Caesars, taken private in a $30.7 billion buyout by Apollo Global Management LLC and TPG Capital in 2008, raised $16.3 million selling 1.81 million shares at $9 each, the company said in a statement. The stock, which was offered for $8 to $10 apiece, will start trading on the Nasdaq Stock Market tomorrow under the symbol CZR.
• China's Copper Demand Growth May Slow to 4%, Wanxiang Forecasts. Copper demand growth in China, the world's biggest user, may decline by half this year as the economy slows and subsidy programs end, according to the metals trader that's owned by the country's biggest auto-parts maker. Refined-metal consumption may expand 4% to 5%, said Shen Xiaoqiang, a researcher at Wanxiang Resources Co., a unit of closely-held Wanxiang Group. That compares with 8% to 10% in 2011, and more than 10% in 2010, said Shen, who's studied the market for more than a decade.
• Illumina Board Rejects Roche’s $5.7 Billion Hostile Bid for Gene Mapper.

Wall Street Journal:

• Concession Smooths Way Toward a Greek Debt Deal. The European Central Bank has made key concessions over its holdings of Greek government bonds, which will contribute to a reduction of the country's debt burden and smooth the path toward a new bailout for the country, said people briefed on Greece's debt-restructuring negotiations.
• Santorum Wins in Missouri, Minnesota. Rick Santorum jolted the Republican presidential race Tuesday by winning nominating contests in Missouri and Minnesota, puncturing Mitt Romney's claim to be the unstoppable front-runner. Mr. Santorum was also leading in early returns from Colorado, a state Mr. Romney won by a wide margin in 2008, when he also won in Minnesota.
• U.S. Market Shines Brighter. U.S. companies, facing slowing markets and rising costs around the world, are taking a new look at their home market. With growth slowing in China and a slump gripping much of Europe, companies are adding capacity in the U.S., replacing aging equipment and even moving overseas production back from low-cost labor markets, a sign that corporate America could be poised to take a bigger role in the economic recovery.
• Goldman(GS), Morgan Stanley(MS) Clarify Clawback Policies. Goldman Sachs Group Inc. and Morgan Stanley will clarify their compensation-clawback policies in response to demands from a group of shareholders led by the New York City Comptroller's office. The banks will say that their policies apply not only to those employees who engage in excessive risk taking or improper conduct but also to those who supervise and manage them.
• GM(GM) Prepares for 'horrendous' Losses at Opel Unit. General Motors Co. is preparing to disclose "horrendous" fourth quarter losses out of its European Opel/Vauxhall unit and is demanding deep cuts from labor unions there, a GM official said on Tuesday. The official said the auto maker's patience with the money-losing operation is running out. "There is increasing frustration with Opel and a feeling that the cuts two years ago did not go nearly deep enough," the official said. "If Opel is going to get fixed, it is going to get fixed now and cuts are going to be deep."
• ObamaCare's Great Awakening. The political furor over President Obama's birth-control mandate continues to grow, even among those for whom contraception poses no moral qualms, and one needn't be a theologian to understand why. The country is being exposed to the raw political control that is the core of the Obama health-care plan, and Americans are seeing clearly for the first time how this will violate pluralism and liberty.

MarketWatch:

• Asia Real-Estate Bull Turns Bearish. Asia’s gradually cooling property markets aren’t the great buys they once were, according to one expert in the region, who says better bargains can be found in the depressed markets in the West. Tim Murphy, the Hong Kong-based chief executive officer of property advisory group IP Global, says he’s telling his clients to look more towards New York and San Francisco for deals, although London also ranks well in terms of rental yield in some projects.

Business Insider:

• Chinese Electricity Consumption Fell Massively In January, And The Chinese New Year Doesn't Explain It. Ultra-brief note here from Nomura's Zhiwei Zhang : According to the China Securities Journal, China's electricity consumption in January fell by 7.5%. We estimate this may be the first decline since 2002 (excluding the financial crisis period in 2008-09), indicating industrial production may have slowed sharply in January. They don't have any more answers here at the moment, except they say that if you're thinking it has something to do with the New Year, then you are incorrect.
• PRESENTING: The High-End Obama Fashion Line That Has Republicans In An Uproar. New York's most glamorous liberals rallied around President Barack Obama today for the launch of "Runway to Win," his campaign's new collection of designer campaign gear. Unsurprisingly, the GOP having a field day with the high-fashion fundraising gimmick, which features expensive election-themed merchandise from big-name designers like Marc Jacobs, Vera Wang and Beyonce. Seizing on a fresh opportunity to bash the coastal elite, the Republican National Committee has released a video that slams the President as an out-of-touch celebrity who is cavorting with fashion moguls while campaigning against income inequality.

Zero Hedge:

• Unadjusted Consumer Credit Soars By Most Since Peak Of Credit Bubble In August 2007, Third Highest Ever. (graphs)
• Greek Economy Implodes: Budget Revenues Tumble 7% In January On Expectation Of 9% Rise.

CNBC:

• House Panel Moves to Fast-Track Keystone Pipeline Plan. A plan to fast-track the stalled Keystone XL pipeline was passed by a key committee in the U.S. House of Representatives on Tuesday, as Republicans made yet another attempt to spur approval of the project that has become a major issue in the 2012 elections.
• Yahoo(YHOO) Boardroom Shakeup: 4 Members Gone, Including Chair.
• Uptrend in Gold to Continue; Next Target $1,880: Charts.

Reuters:

• Groups Ask Court to Block CFTC Position Limit Rules. The financial industry asked a federal court late on Tuesday to temporarily block regulations approved by the U.S. futures regulator aimed at preventing excessive speculation in commodity markets such as oil and gold.
• Plains to Boost Cushing Oil Deliveries With New Pipeline. Plains All American will build a new crude oil pipeline from a booming U.S. shale oil play to the largest U.S. oil hub at Cushing, Oklahoma, the company said on Tuesday, potentially boosting Cushing deliveries by 175,000 barrels per day (bpd).
• Panera(PNRA) Profit Matches Street, Shares Fall.
• Disney(DIS) Earnings Beat Despite Shaky Economy. Walt Disney Co's quarterly revenue fell short of Wall Street's expectations after the movie studio put in a poor showing, but profit grew at a faster-than-expected 12 percent clip as media networks and theme parks held strong in an uncertain economy. Disney shares fell 1.8 percent to $40.28 in after-hours trading.
• Buffalo Wild Wings(BWLD) Q4 beats Street; shares up. U.S. bar and grill chain Buffalo Wild Wings Inc's quarterly profit beat analysts' estimates by the biggest margin in the last eight quarters, sending its shares up 15 percent in extended trade.

Financial Times:

• Backlog Sees Canadian Crude Price Tumble. Crude oil from Canada is being offered for half of international prices as increasing output from the world’s sixth biggest producer threatens to overwhelm regional pipelines and refineries. Western Canada Select, blended from heavy tar sands crudes, this week sold for $62.42 a barrel, according to data from Platts, the energy information service. Brent crude, the global benchmark, on Tuesday topped $117 for the first time since August. This also represents the deepest discount to US crude in more than four years, reflecting Canadian producers’ few options for delivering their oil and problems at refineries in the region. It comes weeks after Barack Obama, US president, blocked plans to build the Keystone XL pipeline, which would carry more than 1m barrels a day from Alberta to refineries in Texas.
• US Banks Snap Up Bundled Mortgage Products. Banks have been responding to low interest rates by snapping up billions of dollars of bundled mortgage products that resemble the sliced-and-diced debt some blame for the financial crisis. The products, known as “collateralised mortgage obligations,” or CMOs, group together securities backed by mortgage loans. These securities are then sliced into various tranches, with each portion being paid out to investors at a different time.

Telegraph:

• Greek Trump Card Fails as Stronger Europe Shrugs Off Break-Up Threat. Europe’s dominant powers and institutions are for the first time willing to risk a Greek default and ejection from the euro if Athens refuses to comply with austerity demands, calculating that the eurozone system is now strong enough to withstand a contagion shock. The European Central Bank’s flood of cheap credit for three years has removed the immediate threat of a banking crisis and proved a powerful tonic for confidence, transforming the character of the crisis. Bond yields have plummeted in both Italy and Spain since November, largely decoupling from the ups and down of daily events in Athens. The effect has been to nullify Greece’s trump card: the implicit threat to bring down the whole edifice if treated too harshly. "It’s not the end of the world if someone leaves the eurozone," said Nellie Kroes, the European Commission vice-president, uttering in public a view already prevalent in Berlin and other northern capitals as Greek rescue costs rise by a further €15bn to €145bn. "It’s always said, if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true," she told De Volksrant.

Die Welt:

• German taxpayers may face at least $33 billion in losses on Greek sovereign bonds, citing its own calculations and those made by the IfW economic think tank. A waiver of part of the aid granted to Greece, which is being discussed, could further increase the amount.

Borneo Post:

• China Fines Parents of Hong Kong-Born Second Child. Mainland Chinese who have a second child in Hong Kong will be fined for breaching China’s one-child policy, Chinese media quoted a family planning official as saying, as mainland Chinese women flock to the former British colony to give birth. Hong Kong’s maternity wards are booked until September, pressured by the growing number of mainland Chinese seeking to circumvent the one-child policy and gain residency rights in one of the country’s wealthiest cities.
  

Evening Recommendations
Keefe, Bruyette & Woods:

• Downgraded (CBOE) to Unerperform, target $21.
  

Night Trading

• Asian equity indices are +.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 165.0 +1.0 basis point.
  
• Asia Pacific Sovereign CDS Index 137.0 +1.0 basis point.
• FTSE-100 futures +.09%.
  
• S&P 500 futures +.01%.
  
• NASDAQ 100 futures +.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CVH)/.64
• (CTSH)/.77
• (WYN)/.44
• (TWX)/.87
• (MCO)/.49
• (CVS)/.89
• (S)/-.38
• (ICE)/1.69
• (RL)/1.68
• (CSC)/.57
• (NWSA)/.34
• (AKAM)/.40
• (CSCO)/.43
• (PRU)/1.76
• (V)/1.45
• (WFM)/.60
• (GGP)/.27
• (JNY)/.00
• (TIN)/.23
• (GRPN)/.03

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,500,000 barrels versus a +4,175,000 barrel gain the prior week. Distillate inventories are estimated to fall by -875,000 barrels versus a -135,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +875,000 barrels versus a +3,017,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.4% versus a -.4% decline the prior week.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Williams speaking, 10Y T-Notes Auction, Germany bond sale, weekly MBA Mortgage Applications report, (AUO) Investor Conference and the CSFB Financial Services Forum could also impact trading today.
  

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

Stocks Rising Slightly Into Final Hour on US Economic Optimism, Euro Bounce, Short-Covering, Tech Sector Optimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.78 +.11%
  
• ISE Sentiment Index 104.0 +15.56%
  
• Total Put/Call .80 -4.76%
  
• NYSE Arms 1.08 +35.81%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.64 +.26%
  
• European Financial Sector CDS Index 155.69 -1.87%
  
• Western Europe Sovereign Debt CDS Index 324.07 -.79%
  
• Emerging Market CDS Index 256.17 +.91%
  
• 2-Year Swap Spread 29.75 +1.75 bps
  
• TED Spread 44.25 -1.75 bps
  
• 3-Month EUR/USD Cross-Currency Basis Swap -72.25 +.75 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.
  
• Yield Curve 172.0 +6 bps
  
• China Import Iron Ore Spot $144.70/Metric Tonne -.10%
• Citi US Economic Surprise Index 77.60 -2.1 points
  
• 10-Year TIPS Spread 2.20 +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +38 open in Japan
• DAX Futures: Indicating +5 open in Germany

Portfolio:

• Higher: On gains in my Retail and Tech 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

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades near session highs, despite less financial sector optimism, profit-taking, global growth fears, rising energy prices and Eurozone debt angst. On the positive side, Energy, Networking, HMO, Retail, Restaurant and Tobacco shares are especially strong, rising more than +.75%. Tech shares are relatively strong again today. Copper is up +.33% and the UBS-Bloomberg Ag Spot Index is down -.41%. Oil continues to trade poorly, despite today's bounce, given the stock rally, euro rally, rising interest from speculators, falling euro debt angst, subsiding emerging market hard-landing fears, improving US data and rising Mid-east tensions. Major European indices were slightly higher on the day, led by a +.62% gain in Italian shares. The Bloomberg European Bank/Financial Services Index rose +.6%. German industrial production fell the most since January 2009 in December, dropping -2.9%. However, investors continue to price in another Eurozone debt crisis “can-kicking” and stabilizing economic activity in the region. The Spain sovereign cds is falling -3.1% to 343.67 bps, the Italy sovereign cds is falling -3.55% to 373.0 bps, the Portugal sovereign cds is down -5.25% to 1,207.04 bps. On the negative side, Coal, Oil Tanker, Oil Service and Biotech shares are under pressure, falling more than -.75%. Financial shares have underperformed throughout the day. Oil is rising +1.55%, Lumber is falling -2.4% and Gold is jumping +1.5%. The Portugal sovereign cds is still up +12.0% in less than 3 weeks. Lumber is down -2.0% 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 rising +7 bps today to 1.98%, but remains a 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 month 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 -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are up +485.0% ytd to the highest level since March of last year and approaching their April 2010 record. Johnson Redbook weekly retail sales rose +2.5% this week versus a +2.7% gain the prior week. This is subpar for a recovery and the weakest reading since April 5th of last year. US stocks continue to trade very well. Almost all negatives are currently being ignored as the “buy every dip” mentality remains firmly in place. While this can continue a while longer, European economic data must begin to trend notably better over the coming months for the S&P 500 to break above approaching technical resistance, in my opinion. Given the austerity measures that have yet to take hold in the region, this remains a large question mark. One of my longs, (AAPL), continues to trade very well as it made another all-time high. I still see substantial outperformance for the shares over the intermediate-term. As well, since I added to my (GOOG) long around its 200-day, the stock has bounced strongly as it approaches its 50-day. I expect this recent outperformance to continue over the intermediate-term as the Facebook IPO draws attention to GOOG’s reasonable valuation and fundamentals improve in the second half of the year. 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. I expect US stocks to trade mixed-to-higher into the close from current levels on US economic optimism, short-covering, a bounce in the euro and tech sector optimism.

Today's Headlines

Bloomberg:

• Greece, Troika Work on Final Rescue Draft. Greece’s government and international creditors are working on the final draft of an agreement on budget and structural measures needed to free up a second aid package, a Greek official said. The document is being drafted at a meeting between Finance Minister Evangelos Venizelos and representatives of Greece’s creditors and will be discussed by political leaders later in the day, the government official told reporters in Athens today on customary condition of anonymity. Caretaker Greek Prime Minister Lucas Papademos plans to convene the nation’s political leaders to seek consensus on the cuts required for a bailout, as unions called a strike to protest and European leaders pressed Greece to reach a deal. Papademos hasn’t yet set a time for the meeting with leaders. While the prime minister and party chiefs have agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors for a 130 billion-euro ($171 billion) rescue. German Chancellor Angela Merkel said “time is running out” to reach an accord, while unions derided the conditions as “blackmail.” “It is clear we are going into another drama for Greece with many questions unanswered,” Patrick Legland, head of research at Societe Generale SA, told Bloomberg Television today. “It’s kind of a catch-22 where they have to reduce their deficit but there is no growth. It’s very tricky.”
  
• Bernanke: 8.3% Unemployment Rate Understates Job Market Weakness. Federal Reserve Chairman Ben S. Bernanke said the 8.3 percent rate of unemployment in January understates weakness in the U.S. labor market. “It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” Bernanke said today in response to questions at a hearing before the Senate Budget Committee in Washington. “There are also a lot of people who are either out of the labor force because they don’t think they can find work” or in part- time jobs." The percentage of the unemployed who have remained without work for 27 weeks or more rose to 42.9 percent in January from 42.5 percent in December, the Labor Department said.
• Oil Rises on Weaker Dollar After Bernanke Says Jobs Market Not Healthy. Oil rose as the dollar weakened after Federal Reserve Chairman Ben S. Bernanke said that the jobs market is far from healthy. West Texas Intermediate crude gained at a faster pace than North Sea Brent in London, reducing the European benchmark’s premium over New York oil for the first time in nine days. The dollar fell on Bernanke’s comments and signs that Greece is near a debt agreement. “Bernanke made some pretty bearish statements and the dollar tanked,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “Once the dollar dropped you saw WTI rebound.” Oil for March delivery rose $1.77, or 1.8 percent, to $98.68 a barrel at 1:03 p.m. on the New York Mercantile Exchange after falling to $95.84. Prices have slipped 15 cents this year.
• U.S. Job Openings Rise by the Most in Almost a Year. Job openings in the U.S. increased in December by the most in almost a year, showing employers are gaining confidence the economy will keep growing in 2012. The number of positions waiting to be filled climbed by 258,000, the biggest gain since February 2011, to 3.38 million, the Labor Department said today in Washington. Excluding government agencies, openings at private employers climbed to the highest level since August 2008.
• Banks Pay Homeowners to Avoid Foreclosures. Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe. Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.
• China Will Increase Domestic Diesel, Gasoline Prices Tomorrow, NDRC Says. China, the world’s second-biggest oil consumer, raised domestic fuel tariffs for the first time in 10 months to spur production by refiners including China Petroleum & Chemical Corp. and PetroChina Co. Retail gasoline and diesel cost 300 yuan ($47.58) a metric ton more starting today, the National Development and Reform Commission said on its website yesterday. The increase is equivalent to 0.22 yuan a liter on average nationwide for gasoline and 0.26 yuan a liter for diesel, the nation’s top economic planning agency said.
• UBS(UBS) Posts 76% Drop in Quarterly Profit.
• Credit VROOMs: Auto Loans in 30 Seconds. Three years ago, credit was so tight that the owner of a legal firm with a $400,000 salary and a very good credit score of more than 700 couldn’t get financed to buy the car he wanted from Michael Mosser’s dealership. “The world is upside-down compared to then,” said Mosser, general manager of Chevrolet and Cadillac stores in Ann Arbor, Michigan. “Today, somebody with a 500 credit score, I can get approved and in a Malibu,” which starts at $22,110. Lenders resisted extending credit to car buyers when the mortgage market collapsed in 2008, helping push General Motors Corp. and Chrysler LLC into bankruptcy and sending U.S. sales to the lowest point in almost three decades. Amid a slow housing market, auto demand is rebounding, spurring lenders from Bank of America Corp. to Capital One Financial Corp. to approve buyers faster and at better rates to compete for a piece of an expanding market. “Banks have had to look elsewhere for growth opportunities, and auto has been one of the nice spaces over the last couple years,” Curt Beaudouin, a bank analyst for Moody’s Investors Service in New York, said in a phone interview.
• Egyptian Generals Said to Drop Meetings With U.S. Lawmakers. An Egyptian military delegation visiting Washington canceled talks with U.S. senators because the group was called home amid a dispute over charges against American pro-democracy workers, according to Senate aides. The generals were scheduled to meet as soon as yesterday with senators including Carl Levin, a Michigan Democrat who heads the Senate Armed Services Committee, and John McCain of Arizona, the top Republican on the panel, according to two Senate aides familiar with the cancellation who spoke on condition of anonymity because they weren't authorized to comment publicly.
  

MarketWatch:

• Gold Futures Jump on Bernanke, Greece. Gold futures gained Tuesday, rising as U.S. Federal Reserve Chairman Ben Bernanke gave testimony to Congress and Greece reportedly neared a deal that would pave the way to more aid. Gold futures for April delivery GC2J +1.40% rose $14.60, or 0.9%, to $1,739.50 an ounce on the Comex division of New York Mercantile Exchange.
• Europe in Grip of Uncommon Deep Freeze. (pics)
  

CNBC.com:

• After US Oil Snub, Canada Focuses on China.

Zero Hedge:

• China Bail Out Europe? Quite The Opposite Actualy, As Chinese Banks Cut European Exposure.
• Merkel Summarizes The Situation.
  

ABC Newsa:

• 'Anonymous' Hacks Personal Info of Oakland Officials. 'Anonymous' has released the personal information of some of Oakland's top city officials online in response to clashes between Occupy Oakland and the police.

Washington Free Beacon:

• Deepak Chopra, Russell Simmons To Fundraise For Obama In NYC. Prospective partygoers can choose from three levels of tickets, “Event Chair” ($35,800), “Event Host” ($10,000), or for those with shallower pockets, “Gala Attendee” ($1,000 a piece). Their massive wealth notwithstanding, Simmons and Chopra were both vocal supporters of the “Occupy” movements, and were named to TheBlaze.com’s list of the “Top Ten Richest Celebrities Supporting ‘Occupy Wall Street.’”

Reuters:

• US Gasoline Demand Down Again With High Prices - MasterCard(MA). U.S. motorists drove fewer miles last week as continuing high prices kept consumers away from the pump, MasterCard said in its weekly SpendingPulse report on Tuesday. Retail gasoline demand fell 5.3 percent from a year ago and 2.8 percent from the previous week, the report said. Prices rose by 8 cents on average to $3.47 per gallon, 11.9 percent higher than the same week last year. The four-week average demand fell for the 46th straight time last week, down 4.9 percent compared with a year ago.

Financial Times:

• Beijing Office Rents Outstrip New York. Prime office rents in Beijing’s central business district rose 75 per cent last year, the fastest globally, and up from a 48 per cent increase in 2010, according to the survey. It now costs $130 a year for a square foot of a top-grade office in Beijing, compared with $239 in London’s West End and $120 in midtown Manhattan.

Telegraph:

• An orderly EMU break-up, à la Français. Salut souverainistes. For those wanting more details on the euro break-up plan drafted by French economists, here is the link to the L’Observatoire de L’Europe website. A few extracts, loosely translated: "The obstinate determination of governments to take us by forced march deeper into the euro impasse can only lead to the general aggravation of the economic situation in Europe." "Even though our American and Chinese competitors have an interest in the survival of the single currency, the euro is condemned to an uncontrollable explosion sooner or late".
• Debt Crisis and Greek Debt Talks: Live.
  

Der Spiegel:

• It's Time to End the Greek Rescue Farce. For the past two years, Greece has wrangled with the euro-zone states and the International Monetary Fund (IMF) over its so-called "rescue." Austerity measures have been agreed to, aid has been paid and private creditors have been forced to accept "voluntary" debt haircuts. Despite all this, Greece is in even worse shape today than it was then. Its economy is shrinking, the debt ratio is rising and the country and its banks have been cut off from capital markets. There isn't even the slightest sign that the situation might improve. Something has gone very wrong with this rescue.

Globe and Mail:

• Rogers, BCE Vying For A Bite of Apple's(AAPL) iTV. Canada’s largest telecommunications companies are squaring off in a fight about the future of television. Rogers Communications Inc. and BCE Inc. are in talks with Apple Inc. (AAPL-Q469.385.411.17%) to become Canadian launch partners for its much-hyped Apple iTV, a product that has the potential to revolutionize TV viewing by turning conventional televisions into gigantic iPads.

Shanghai Daily:

• Shanghai Existing Home Sales Decline to 5-Year Low. SALES of existing homes dropped to a five-year low in Shanghai last month and more than half of the transactions involved properties that were sold at not more than 900,000 yuan (US$142,630). A total of 4,200 previously occupied units, mainly houses, were sold across the city in January, the lowest monthly transactions recorded since 2007, according to data released yesterday by Century 21 China Real Estate. The sales marked a fall of 45 percent from December and a plunge of 80 percent from same month a year earlier. "The significant retreat was mainly a result of the Spring Festival holiday but it was still a record low volume if we compared it to figures in the same period in previous years," said Eric Luo, an analyst with Century 21.