Evening Headlines
Bloomberg:- Europe Faces Pressure as G-20 Mulls IMF Role. The U.S., Chinese and Japanese officials say they will press euro-area countries to do more to merit outside help when the world’s largest economies gather tomorrow for a meeting dominated by Europe’s sovereign-debt woes just days after Greece secured a second bailout. European officials will push other Group of 20 nations to commit fresh cash to the International Monetary Fund to help defuse the region’s fiscal crisis, while the Obama administration says Europe now must first strengthen its firewall to prevent debts of countries such as Italy and Portugal from becoming unsustainable. G-20 finance ministers and central bank governors meet in Mexico City four days after the European Union sanctioned a 130 billion-euro ($170 billion) rescue for Greece and amid warnings by the IMF that concerns about debt sustainability could drag the world into another recession.
- Rudd to Challenge Gillard for Australian Leadership. Former Australian Prime Minister Kevin Rudd said he will challenge his successor Julia Gillard in a Feb. 27 leadership ballot as the ruling Labor party seeks to end weeks of rivalry that’s undermining the government. “Julia has lost the trust of the Australian people,” Rudd, who quit as foreign minister earlier this week, told reporters today in Brisbane. “I want to finish the job the Australian people elected me to do.” The vote comes 20 months after Gillard ousted Rudd from the nation’s top job in a party room coup amid complaints about his autocratic style. The victor faces the challenge of overcoming near-record low public support for the government, which is trailing opposition leader Tony Abbott’s Liberal-National coalition ahead of elections due in 2013.
- BofA(BAC) Squeezes Mortgage Pipeline to Fannie as Dispute Escalates. Bank of America Corp., the second- biggest U.S. lender by assets, is stopping the sale of new home loans to government-owned Fannie Mae as a dispute over who should bear the costs for defective mortgages escalates. The bank is cutting off Fannie Mae from loans starting this month, except for modifications and some refinancings, because of the U.S.-controlled company’s stance on repurchases, Bank of America said yesterday in a filing. The firms are in talks to end the disagreement, the bank said.
Wall Street Journal:
- In Retreat, Sears(SHLD) Set to Unload Stores. After seven years of trying to rebuild the iconic retailer Sears, hedge-fund manager Edward S. Lampert reversed course on Thursday, announcing that Sears Holdings Corp. will unload more than 1,200 stores in an effort to raise up to $770 million of much-needed cash. Many on Wall Street interpreted the move as the beginning of the breakup of the company. Sears on Thursday reported a loss of more than $3 billion for 2011, and same-store sales have fallen for six straight years.
- Regulators Propose Exemptions for Large Swap Trades. U.S. regulators on Thursday proposed allowing traders to delay disclosing information about certain large deals in the swaps derivatives market. The Commodity Futures Trading Commission voted 3-2 on a proposal to exempt swap "block trades" of a certain size from new requirements that mandate immediate disclosure of swap transactions. Swaps are complex derivative contracts that allow traders to "swap" fluctuations in interest rates, exchange rates, the likelihood of default or other financial instruments. The CFTC on Thursday proposed limits that would qualify about 6% of interest-rate swaps and credit-default swaps as block trades. The limits were based on the value of outstanding swap contracts in each swap market. For instance, in the oil-swaps market, a contract linked to more than 100,000 barrels of light, sweet crude would be considered a block trade, and that trade data could be delayed. In addition, certain other details of the transaction could be screened from the public to protect the identity of the traders, assuming a final version of Thursday's proposal is approved by the commission. Brokers and traders argue that exceptions are necessary for very large trades to preserve the anonymity of traders during the time it takes to execute their trades. Not everyone agrees on when traders need anonymity. Dennis Kelleher, president and CEO of Better Markets, a nonprofit advocacy group, said that he had argued for a very high threshold for block trades. "What it really means is, how far are we going to move away from the current dark over-the-counter market?" Mr. Kelleher said.
- Nike, Adidas Gear Up for Jeremy Lin. Athletic-gear giant Nike Inc., which built its global franchise around the signature shoes and apparel of celebrity athletes like Michael Jordan, is working hard on opportunities for the latest star in its stable, New York Knicks sensation Jeremy Lin.
- Europe's Banker Talks Tough. European Central Bank President Mario Draghi warned beleaguered euro-zone countries that there is no escape from tough austerity measures and that the Continent's traditional social contract is obsolete, as he waded into an increasingly divisive debate over how to tackle the region's fiscal and economic troubles.
- Cost of $10 Billion Stimulus Easier to Tally Than New Jobs. Alfredo Garcia was among the residents of Webb County, Texas, banking on a windfall from federal stimulus money. Mr. Garcia expanded his Mexican restaurant from 80 to 120 seats, anticipating a rush of new patrons springing from the nearby Cedro Hill wind farm, a project built with the help of $108 million from U.S. taxpayers. When construction ended, Cedro Hill had just three employees and Mr. Garcia's restaurant, Aimee's, filed for bankruptcy protection. "Nobody came," said Mr. Garcia, a county judge who closed Aimee's last year, putting 18 people out of work.
- Private-Equity Fund in Valuation Inquiry. In a case that could send ripples through the private-equity industry, federal regulators and the Massachusetts attorney general are investigating whether a fund that was part of Oppenheimer Holdings Inc. overstated the value of one of its holdings, according to people close to the matter.
- U.S. Readies Onslaught Against BP(BP). When a civil case against BP PLC opens on Monday, federal prosecutors plan to accuse the oil giant of making a series of decisions that caused it to be grossly negligent in the deadly explosion on the Deepwater Horizon drilling rig, according to sealed documents reviewed by The Wall Street Journal.
- Greek Bond Deal Makes German Banker See Red. The head of Germany's second-largest bank by assets on Thursday lambasted euro-zone governments and the bloc's central bank, criticizing the Greek bailout in unusually blunt language for a member of Europe's financial establishment. "The participation in the haircut is as voluntary as a confession during the Spanish Inquisition," Commerzbank AG Chief Executive Martin Blessing said when asked at the bank's annual news conference about voluntary private participation in the Greek bailout negotiated by the European Central Bank and European Union officials.
Business Insider:
Zero Hedge:
IBD:
LA Times:
MSNBC:
CNN:- U.S. Automakers Face Tough Times in China. Recent developments suggest the bonanza promised by China becoming the world's largest auto market is in danger of shrinking dramatically -- or ending altogether. This could be a big blow to General Motors (GM, Fortune 500), Ford (F, Fortune 500), and Chrysler. At issue is the inevitable cooling of China's overheated economy -- but also complicated social and political problems that lie at the heart of the Chinese system. Here are just a few of the red flags:
The American Interest:
- Rising Gas Prices: All Part of Obama's Plan? Politico is shedding some light on a three year-old sound bite that continues to haunt the Obama Administration: Energy Secretary Steven Chu’s comments that American gas prices should be as high as Europe’s: “Somehow,” Chu said, “we have to figure out how to boost the price of gasoline to the levels in Europe.” Unsurprisingly, Republicans have latched on to these comments as evidence that the Obama Administration is out of touch with regular Americans and harbors an agenda favoring green special interests over the needs of American businesses. With gas prices rising to the point where they threaten the already-fragile economic recovery, this figures to be a potent weapon against the president in the upcoming election. More surprising here is that Politico is jumping on the bandwagon—although it notes that Chu’s remarks have been detrimental to Obama, the piece laments that the goal of raising gas prices doesn’t get the sympathetic attention it obviously deserves, given the support of numerous “experts.” With thinking like this dominating media and intellectual circles, it’s little wonder that the mainstream media is perceived as elitist and out of touch.
Reuters:
- Crocs(CROX), Deckers(DECK) Expect Weak 1st Qtr, Shares Down. Footwear companies Crocs Inc and Deckers Outdoor Corp forecast weak earnings for the first quarter, hurt by higher costs of raw materials. Shares of Deckers were down 9 percent and those of Crocs down 10 percent in trading after the bell.
- Apple(AAPL) Ponders Cash, Caves On Board - Vote Proposal. Apple Inc on Thursday adopted a measure long desired by investors and corporate governance activists, granting its shareholders a bigger say in the appointment of directors to the board of the world's most valuable technology company. Chief Executive Tim Cook also repeated that he has been "thinking very deeply" about investors' demands that the consumer electronics company return some of its $98 billion in cash and securities to shareholders via a dividend. Wall Street has bet on the rising likelihood that some of that enormous war chest could be doled out this year, since Cook told investors last week that discussions around that hoard had intensified. "We've been thinking about cash very deeply," he said, echoing previous comments. "Frankly speaking, it's more than we need to run the company."
- Salesforce.com(CRM) Results Beat Street View, Shares Rise. Web-based software maker Salesforce.com Inc reported quarterly earnings and revenue ahead of Wall Street forecasts, sending its shares higher. The company reported profit, excluding certain items, of 43 cents per share, in its fiscal fourth quarter ended Jan 31, beating the 40 cent average estimate of analysts polled by Thomson Reuters I/B/E/S. Quarterly revenue rose 38 percent from a year earlier to $632 million, beating the $624 million expected by analysts. Salesforce.com shares rose 6.6 percent in after-hours trading to $140.50, after closing at $131.77 on the New York Stock Exchange.
Financial Times:- Madrid Presses EU to Ease Deficit Targets. Spain is pressing the European Commission to ease the country’s strict budget deficit target for this year, arguing that the European Union executive’s own pessimism about the Spanish economy shows the potential risks of too much austerity.
- Athens Told to Change Spending and Taxes. European creditor countries are demanding 38 specific changes in Greek tax, spending and wage policies by the end of this month and have laid out extra reforms that amount to micromanaging the country’s government for two years, according to documents obtained by the Financial Times.
Telegraph:
Evening Recommendations
Stifel Nicolaus:- Rated (IBKR) Buy, target $20.
- Rated (KCG) Buy, target $16.
CSFB:- Upgraded (AVB) to Outperform, target $145.
Night Trading- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 160.50 -4.5 basis points.
- Asia Pacific Sovereign CDS Index 133.25 +.25 basis point.
- FTSE-100 futures +.30%.
- S&P 500 futures +.21%.
- NASDAQ 100 futures +.21%.
Morning Preview Links
Earnings of NoteCompany/Estimate
- (ANR)/.27
- (FCN)/.67
- (IPG)/.39
- (JCP)/.67
- (TDS)/.30
Economic Releases
9:55 am EST- Final Univ. of Mich. Consumer Confidence for February is estimated to rise to 73.0 versus a prior estimate of 72.5.
10:00 am EST
- New Home Sales for January are estimated to rise to 315K versus 307K in December.
Upcoming Splits
Other Potential Market Movers
- The Fed's Dudley speaking, Fed's Plosser speaking, Fed's Bullard speaking, Fed's Williams speaking, Italy bond auction, G-20 Meeting and the (ETN) Analyst Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
