Stocks Rising into Final Hour on Euro Bounce, US Data, Tech/Financial Sector Optimism, Short-Covering

Broad Market Tone:

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

Equity Investor Angst:

• VIX 15.11 -1.31%
  
• ISE Sentiment Index 150.0 +80.72%
  
• Total Put/Call .69 -15.85%
  
• NYSE Arms .42 -28.92%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 89.47 -2.36%
  
• European Financial Sector CDS Index 152.83 -.58%
  
• Western Europe Sovereign Debt CDS Index 229.0 +2.31%
  
• Emerging Market CDS Index 225.84 -.22%
  
• 2-Year Swap Spread 26.25 unch.
  
• TED Spread 39.75 +.5 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -58.0 +2.0 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 192.0 +3 bps
  
• China Import Iron Ore Spot $145.0/Metric Tonne +.49%
  
• Citi US Economic Surprise Index 41.0 +1.1 points
  
• 10-Year TIPS Spread 2.39 +1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating a -60 open in Japan
• DAX Futures: Indicating a +3 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Tech, Retail and Medical sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
  
• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg

• Greek Debt Deal Delay Helps Banks as Risks Shift to Public. Delaying Greece's debt restructuring by more than a year reduced banks' potential losses as firms trimmed their holdings and most of the risk shifted to European taxpayers. When Greece was first rescued by the European Union and the International Monetary Fund in May 2010, lenders in other EU nations held $68 billion of its sovereign debt, according to the Bank for International Settlements. If Greece had defaulted, banks would have lost $51 billion at a 25 percent recovery rate. Banks' holdings of Greek bonds fell by more than half to about $31 billion over the next 15 months, according to BIS, cutting creditors' losses at last week's swap by at least 45 percent. Lenders are protected against further losses thanks to sweeteners from the EU to encourage the exchange. Meanwhile, Greece's debt remains almost unchanged and the risk of future default is now mostly borne by the public. The same playbook is being used with Portugal and Ireland. "This is a horrible deal for the EU taxpayer," said Raoul Ruparel, chief economist at Open Europe, a London-based research group. "The longer we wait for these restructurings, the worse the deal gets for the public. There's an ongoing risk transfer from the banks to the taxpayers."
• Spain May Remove Tax Breaks for Large Companies, Cinco Dias Says. Spain may eliminate tax breaks that allowed the biggest companies to reduce their effective tax rate to 17 percent in 2009, Cinco Dias said. Officials are concerned that multinationals are abusing tax breaks to lower their payments from the official rate of 30 percent, the newspaper said, citing people at the tax agency without naming them.
• European Car Sales Decline Most Since October 2010. European car sales dropped the most in more than a year, led by Renault SA (RNO) and PSA Peugeot Citroen (UG) as consumers shied away from purchases amid a weak economy. Registrations in February fell 9.2 percent from a year earlier to 923,381 million vehicles, the fifth consecutive monthly decline, Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. The decline was the steepest since a 16 percent drop in October 2010. Two-month sales fell 7.8 percent to 1.93 million vehicles.
• Europe-U.S. Gasoline Cargoes Seen Touching 7-Month Low. Gasoline shipments from Europe across the Atlantic Ocean are set to plunge to the lowest level since August over the next two weeks as U.S. gasoline buying declines, a Bloomberg News survey showed. Traders and oil companies booked or probably will hire 16 ships up to March 29, according to the median estimate in a survey yesterday of seven shipbrokers, traders and owners who specialize in shipping the auto fuel. That’s two tankers fewer than in the two weeks to March 22. U.S. gasoline demand fell 7.2 percent below a year earlier last week, the biggest decline in more than two years, MasterCard Inc. (MA) said in its SpendingPulse report this week. Rising auto fuel prices have curbed demand in the U.S., Vienna- based researcher JBC Energy GmbH said in an e-mailed note March 13. The average gasoline pump price could rise to $4.25 a gallon by May, said JBC, citing the American Automobile Association. “The dire situation for gasoline may not let up anytime soon,” JBC said in the report. Daily returns for tankers carrying gasoline on the Rotterdam-to-New York trade route fell for a fifth day to $10,981, according to the Baltic Exchange yesterday. Some 35 vessels probably will be available to haul cargoes across the Atlantic Ocean, the survey showed. That’s an increase of four from last week, and the biggest surplus in at least eight months, prior survey data show.
• Goldman's(GS) 'Change in Culture' Hurts Clients, Greenberg Says. Maurice “Hank” Greenberg, the former chairman of American International Group Inc. (AIG), said Goldman Sachs Group Inc. had a “change in culture” that made the securities firm less responsive to clients. “You didn’t have investment bankers running the firm, you had traders running the firm” after Goldman Sachs went public, Greenberg told Bloomberg Television’s Betty Liu today in an interview on the “In the Loop” program. “And a trader has a short-term memory, and a short-term look at things, and that change really has changed the culture of Goldman Sachs. It is not the Goldman Sachs that represented companies as an investment banker.”
• Oil Holds Steady in New York, Reversing Earlier Decline. Oil was little changed in New York after reversing an earlier decline of 1.6 percent. Prices fell earlier fell on a report that President Barack Obama discussed a release of strategic crude reserves in a meeting with U.K. Prime Minister David Cameron, then rebounded as Jay Carney, the White House press secretary, said any reports of an agreement aren’t accurate. Crude oil for April delivery rose 2 cents to $105.45 a barrel at 1:10 p.m. on the New York Mercantile Exchange. Brent oil for April settlement fell $1.11, or 0.9 percent, to $123.86 a barrel on the London-based ICE Futures Europe exchange.
• Jobless Claims in U.S. Decrease, Matching Four-Year Low. Applications for unemployment insurance payments fell by 14,000 to 351,000 in the period ended March 10, Labor Department figures showed today. The Bloomberg Consumer Comfort Index rose to minus 33.7 from minus 36.7 in the week ended March 11. The Federal Reserve Bank of New York’s general economic index increased to 20.2 this month, the highest since June 2010, from 19.5 in February. Readings greater than zero signal growth in New York, northern New Jersey and southern Connecticut. A similar index from the Philadelphia Fed showed manufacturing in eastern Pennsylvania, southern New Jersey and Delaware expanded at the fastest pace in 11 months as factory employment picked up. Rising fuel costs threaten to curb corporate profits and consumer spending. The average price of regular gasoline at the pump climbed to a 10-month high of $3.82 a gallon yesterday. Today’s Labor Department report showed the producer-price index rose 0.4 percent in February following a 0.1 percent increase the prior month.
• Cisco(CSCO) Buys NDS in $5 Billion Deal to Add Digital TV Software. Cisco Systems Inc., the largest maker of equipment for computer networks, agreed to buy NDS Group Ltd. in a deal valued at about $5 billion to add software used in next-generation video services.

Wall Street Journal:

• Goldman(GS) Plays Damage Control. Goldman Sachs Group Inc. said it will examine claims by an employee who quit Wednesday that executives "callously" talk about "ripping their clients off" in order to make more money for the securities firm.

Business Insider:

• Here Comes The 2012 Tidal Wave of Foreclosures.
• The Taliban Breaks Off Peace Talks With US.
• Qaddafi's Missing State Of The Art Missiles Are Now Pointed At Israel.
• Art Cashin's Warning Came True, A Top Chinese Politician Was Just Replaced By A North Korean-Trained Economist.
• Matt Taibbi's Newest Rolling Stone Piece Is The Harshest Thing We've Ever Read About Bank Of America.

Zero Hedge:

• S&P Says Improbable Any Economic Improvement Would Bring Back US AAA Bond Rating.
• Spanish Housing Re-Plunging. (graph)
• The "New Normal" American Dream of Renting Is About to Become Very Expensive.
• Jens Weidmann Defends Bundesbank Against Allegations Of TARGET2-Induced Instability.

Seeking Alpha:

• 8 Outperforming Retail Stocks Being Bought Up By Hedge Funds.

Reuters:

• Ford(F) Sued, Said to Hide Truck Fuel Tank Defect. Ford Motor Co has been sued for allegedly selling trucks with defective fuel tank linings over a 10-year period, and hiding the problem from consumers even as it warned dealers. The lawsuit filed Wednesday in a New Jersey federal court said fuel tank linings on 10 E- and F-series truck models made between 1999 and 2008 would "separate and flake off." It said this would clog fuel systems with debris and rust, causing a sudden loss of engine power, and potentially causing vehicles to buck or kick or suddenly stall. Ford in 2007 issued a "secret" technical service bulletin to dealers advising them of the problem, but neither recalled the affected trucks nor offered to repair them for free, the complaint said. "Hundreds, if not thousands," of drivers have experienced the defect, it added.
• Canadian Pacific(CP), Unimin Strike Frack Sand Deal. Canadian Pacific Railway said on Thursday it will provide exclusive rail service to Unimin Corp to transport frack sand from a Wisconsin facility the industrial mineral producer expects to open in 2013. The new facility in Tunnel City will produce two million tons of frack sand annually - used in the drilling industry in hydraulic fracturing - for markets in North Dakota, Texas, Colorado and elsewhere.

Handelsblatt:

• German Debt to Grow to 2.14 Trillion Euros. Germany's debt will continue to grow this year and next, confounding the hopes of Finance Minister Wolfgang Schaeuble that it is stagnating, citing a forecast by the IfW economic institute. Debt-crisis measures alone will add 54 billion euros to accumulated debt this year and help bring the total to 2.14 trillion euros, or 81.6% of economic growth, Kiel-based IfW's calculations show. Debt will grow by another 85 billion euros next year. The euro's stability rules stipulate that the debt of individual member states must remain within 60% of annual gross domestic product.
  

21st Century Business Herald:

• Slower China Power Consumption Adds to Hard Landing Concerns. March 15, China’s power consumption expanded at a slower pace in the first 2 months from the same period a year earlier, further adding to concern the world’s second-largest economy could experience a “hard landing”. China's power consumption rose 6.7 percent year-on-year to 749.7 billion kilowatt-hours in the first 2 months, lower than the 11.7 percent growth in full-year 2011, the National Energy Administration said on Wednesday. Primary industries saw power consumption decrease by 4.7 percent year-on-year to 12.3 billion kilowatt-hours, and that of secondary industries rose only 4.8 percent to 531.6 billion kilowatt-hours, a sharp decrease compared with the 11.41 percent growth over the same period last year. A retreat in electricity consumption is the latest data suggesting China could be headed for a hard landing. Official data released last week showed China’s factory output in the first 2 months of the year rose the least since 2009, while retail sales increased less than market expectations and inflation eased to the slowest pace in 20 months. Adrian Mowat, JPMorgan Chase & Co.’s chief Asian and emerging-market strategist, said at a conference in Singapore on Wednesday that China’s economy is already in a so- called “hard landing”. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact,” Bloomberg quoted Mowat as saying. Gary Shilling, president of a U.S.-based consulting company, told Bloomberg that China’s economy is headed for a “hard landing” this year as weaker demand overseas chokes off exports. China’s exports in January fell 0.5 percent from a year earlier, the biggest slowdown in more than 2 years, and rose 4 percent in February after seasonal adjustments.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.17%

Sector Underperformers:

• 1) Computer Hardware -.90% 2) Disk Drives -.80% 3) Energy -.40%

Stocks Falling on Unusual Volume:

• AMCX, WDC, AAPL, NGG, BAP, SXC, VRA, AMCX, MAPP, GOLD, HWCC, RUE, MDCA, SHPGY, SCHN, TUDO, JAKK, CYAN, AIRM, ARP, GES, APU, NMI, AIZ and KMP
  

Stocks With Unusual Put Option Activity:

• 1) KRE 2) CTRP 3) XLY 4) FITB 5) UPL
  

Stocks With Most Negative News Mentions:

• 1) APU 2) JOY 3) C 4) WFC 5) MON
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value +.17%

Sector Outperformers:

• 1) Oil Tankers +2.81% 2) Coal +2.7% 3) Road & Rail +2.69%

Stocks Rising on Unusual Volume:

• VECO, CREE, CYN, STI, SCHL, JVA, ITMN, ADTN, SZYM, RBCN, NUVA, CME, OVTI, CSX, OSG, MBI, ACI, BTU, ABD and AFFY
  

Stocks With Unusual Call Option Activity:

• 1) ITMN 2) BTU 3) TIVO 4) GES 5) DLPH
  

Stocks With Most Positive News Mentions:

• 1) UNP 2) LVLT 3) VECO 4) LMT 5) GEOI
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• Fitch Puts U.K. Debt on Negative Outlook Days Away From Budget. Fitch Ratings said Britain risks losing its top investment grade because of its limited ability to deal with shocks, days before Chancellor of the Exchequer George Osborne will present his annual budget. Fitch changed the outlook on Britain to “negative” from “stable,” indicating a “slightly greater” than 50 percent chance that the AAA rating will be reduced within two years, the company said in a statement in London late yesterday, citing the weak economic recovery, high debt levels and threats from Europe’s debt crisis. Osborne will meet coalition partners later this week to agree on a budget he will present on March 21. The decision “reflects the very limited fiscal space to absorb further economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery,” Fitch said.
• Spanish Stocks Left Out of Rally on Rajoy Budget Gap Skepticism. Spanish stocks are the only developed market suffering losses this year as Prime Minister Mariano Rajoy fails to rein in the budget deficit fast enough to assure investors. The IBEX 35 Index (IBEX) has dropped 2.1 percent in 2012, the only decline among 24 developed markets tracked by Bloomberg. That compares with an 11 percent rally in the Stoxx Europe 600 Index (SXXP), the best start to a year since 1998. The Spanish gauge has erased all gains that followed the European Central Bank’s Dec. 8 announcement of unlimited three-year loans for banks at below- market borrowing costs. Investors are shunning Spain after Rajoy said the budget deficit will be higher than forecast while Germany praised Italian Prime Minister Mario Monti’s “bold” austerity measures. Spanish benchmark borrowing costs rose above Italy’s for the first time in almost eight months in March, while analysts have cut profit estimates for Spain this year at the fastest pace among Europe’s 10 largest markets. “Since you got Monti in Italy, the market has said, ‘Fine, Italy is in safe pair of hands,’” said Jacob de Tusch-Lec, a fund manager who helps oversee $18 billion at Artemis Investment Management in London. “It is tough to see in Spain for now what can resolve the crisis. Things are so bad that as an investor you ask yourself, ‘Do I need to be there?’”
• Republicans Accuse IRS of Scrutinizing Tea Party Groups. Senate Republicans today expressed concern that the Internal Revenue Service was singling out Tea Party groups for extra scrutiny in deciding whether to grant them tax-exempt status. “It is critical that the public have confidence that federal tax compliance efforts are pursued in a fair, even- handed, and transparent manner - without regard to politics of any kind,” the senators wrote to IRS Commissioner Douglas Shulman.
• Oil-and-Gas Boom Interrupts Greening of America: Caroline Baum. Anecdotes are no substitute for hard data. But when they start to reach a critical mass and they all tell the same story, you know something big is going on. -- A longtime car salesman relocates to south Texas to capitalize on the soaring demand for truckers to haul sand to hydraulic fracturing sites across the Eagle Ford shale formation. Nearby, the Corpus Christie School District can’t find bus drivers, who are getting paid a lot more to cart sand. -- Workers pour into Williston, North Dakota, drawn by offers of six-figure salaries for jobs connected with the Bakken shale formation. Even though housing development is sky- rocketing, the Wal-Mart parking lot looks like an RV park, packed with campers providing temporary living quarters until housing construction catches up with demand. -- There is no oil-and-gas drilling in Idaho, but Fleetwood Homes has been ramping up production and hiring workers to build pre-fab homes for shipment to the Bakken oil field in North Dakota, according to the Wall Street Journal. -- Energy independence, the Holy Grail for every U.S. president since Jimmy Carter, is within reach, oil-industry executives and analysts tell NPR. Within the next 10 years, the U.S. will no longer have to import crude oil and will be able to export natural gas, energy economist Philip Verleger says. PFC Energy Chief Executive Officer Robin West compares the impact of the “shale gale” to the fall of the Berlin Wall. -- Some long-haul trucking companies are converting to natural gas because of the cost advantage over diesel, according to Bloomberg News. Fleet owners that don’t convert a portion of their vehicles to natural gas will find themselves at an economic disadvantage. For anyone who hasn’t read or heard about it yet, there’s an oil-and-gas boom under way in the U.S. By some estimates, the U.S. has three times the proven shale oil reserves of Saudi Arabia.
• Watch Bernanke's 'Little' Inflation Capsize U.S.: Amity Shlaes. The thing about inflation is that it comes out of nowhere and hits you. Monetary policy is like sailing. You’re gliding along, passing the peninsula, and you come about. Nothing. Then the wind fills the sail so fast it knocks you into the sea. Right now, the U.S. is a sailboat that has just made open water, and has already come about. That wind is coming. The sailor just doesn’t know it.
• Wise Up on Goldman Sachs(GS). In his extraordinarily public resignation letter, Greg Smith, who had spent time recruiting the best and the brightest to Goldman Sachs, wrote, “I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.” The proper functioning of Wall Street is too vital to the economy to tolerate the duplicitous practices of Goldman Sachs and firms like it, especially after what the American people did to rescue these businesses in their darkest hours. The country’s political class appears to lack the power or will to hold large financial institutions to account. There is a massive leadership vacuum at the top of Wall Street today; and it’s quite possible that only continued, relentless public shaming will force the leaders of these firms to make the kinds of cultural changes necessary to bring their actions in line with normative behavior.
• China's Foreign Direct Investment Falls for Fourth Month. Foreign direct investment in China fell for a fourth straight month in February as companies reined in spending amid a slowdown in the world’s second-biggest economy and the prolonged European debt crisis. Investment declined 0.9 percent to $7.73 billion last month from a year earlier, the Ministry of Commerce said in a statement today, following a 0.3 percent drop in January. Overseas spending in the first two months decreased 0.6 percent to $17.7 billion. The outlook for foreign investment in China is “grim,” ministry spokesman Shen Danyang said last month, citing “slack” external demand, rising operating costs and funding difficulties faced by some companies.
• Buffett, Branson, Clooney, Among Guest for Cameron State Dinner. Billionaires Warren Buffett and Richard Branson and actor George Clooney are among the guests invited by President Barack Obama to a state dinner honoring U.K. Prime Minister David Cameron. The guest list released by the White House before tonight’s dinner includes business executives, government officials, entertainers and Obama political allies and donors. Joining Buffett, the chairman of Omaha, Nebraska-based Berkshire Hathaway Inc. (BRK/A), and Branson, founder of Virgin Group Ltd., are Blackstone Group LP President Tony James, Orin Kramer of Boston Provident Partners LP, movie producer Harvey Weinstein and Supreme Court Justice Antonin Scalia. It also includes Obama supporters such as Matthew Barzun, a former CNET Networks Inc. executive, who is leading fundraising for the president’s re-election campaign and Terry McAuliffe, a former Democratic National Committee chairman, and Neil Bluhm, a Chicago billionaire and co-chairman of Urban Shopping Centers Inc. (URB), who is an Obama fundraiser. The guests will dine on three courses and dessert, starting out with crisped halibut with potato crust, according the menu released by the White House. The main course is bison Wellington, which the menu describes as “a perfect pairing of U.S. and U.K. cultures.” As with the last two state dinners, the menu notes only that “an American wine will be paired with each course.” The White House hasn’t listed the wines on menus since Obama’s dinner in January 2011 for Chinese President Hu Jintao. One of the wines served then was a top-rated 2005 Cabernet Sauvignon from Washington state that originally sold for $115 a bottle and went for as much as $399 by the time of the dinner. While the White House paid a price closer to the $115 price, according to the vintner, some Obama critics highlighted the higher price as an extravagance.
• Rice Prices 10-30% Higher in Many Asian Nations. A number of countries in the Asia Pacific region have come close to their limit for agricultural expansion, Jose Graziano da Silva, director general of the Food and Agriculture Organization, said in prepared statement to be delivered at a conference in Hanoi today. High food prices and volatility remain a threat to nations, with retail rice prices in many Asian countries 10 percent to 30 percent higher than in 2011, according to the remarks.
  
• U.S. May Sanction India Over Level of Iran-Oil Imports. Obama administration officials say they are worried India may run afoul of a new U.S. law restricting payments for Iranian oil, forcing the White House to impose sanctions on one of its most important allies in Asia.
  

Wall Street Journal:

• Euro-Zone Firms Find Loans Hard to Get. Portuguese leather-goods maker Antonio & Mateus Ltd. had a plan to cope with the country's economic downturn. The small manufacturer decided it needed to find clients abroad, and earlier this year it landed a large order for purses from a French company. With limited funds to start production for the new order, the company asked its longtime bank, Banco BPI SA, for a €25,000 ($32,560) loan. The request was turned down within three days, despite a clean banking record.
• Yahoo(YHOO) Is Big Gun in Facebook Fight. Yahoo Inc.'s patent suit against Facebook Inc. pits a weakened Internet pioneer against a fast-growing tech powerhouse, but some intellectual-property experts say it is Yahoo that has the power position in the fight. Experts in the field view the number and quality of Yahoo's patents as potent weapons against Facebook in what could be a long and costly legal battle as the social-networking website prepares for its long-awaited initial public offering.
• Google(GOOG) Gives Search a Refresh. Google Inc. is giving its tried-and-true Web-search formula a makeover as it tries to fix the shortcomings of today's technology and maintain its dominant market share. Over the next few months, Google's search engine will begin spitting out more than a list of blue Web links. It will also present more facts and direct answers to queries at the top of the search-results page.
• ESL Fund Seeks to Calm Concerns on Sears Vendors. Edward S. Lampert's hedge fund has stepped in to make sure make sure vendors continue to supply Sears Holdings Corp. stores by assuming some of the risk of financial institutions that provide a form of insurance to the vendors.
• New iPad: a Million More Pixels Than HDTV. Apple's(AAPL) iPad could be described as a personal display through which you see and manipulate text, graphics, photos and videos often delivered via the Internet. So, how has the company chosen to improve its wildly popular tablet? By making that display dramatically better and making the delivery of content dramatically faster.
• SEC Cracks Down on Pre-IPO Trading. Federal regulators are cracking down on an obscure but booming market for trading shares in companies before they go public. The Securities and Exchange Commission brought charges against two money managers, alleging they misled and overcharged investors on funds formed to buy shares of Facebook Inc., Twitter Inc. and other social-media companies.

Business Insider:

• Rod Blagojevich Just Gave An Utterly Bizarre Farewell Statement The Day Before He Goes To Prison For 14 Years.
• If Patents Are Weapons, These Companies Are Armed To The Teeth.
• Meredith Whitney: Invest In Citi(C)? Not In My Lifetime.
• 'Jerry Maguire' Memo Now Circulating Around Goldman Is Urging Employees To Follow Greg Smith And Quit.

Zero Hedge:

• The Vampire Squid's Problems. Smith’s sentiments are appreciated, but actually he is wrong about a fundamental point, at least in today’s business environment. Goldman doesn’t have to give a damn about its clients because the vampire squid has found a much more lucrative way of insuring their bottom line: government largesse. Let’s be clear: the bailout of AIG was not a bailout of AIG. It was a bailout of Goldman Sachs, to whom AIG were a counter-party. AIG’s failure would have meant Goldman’s balance sheet — already stuffed with derivatives dynamite — blew up. Goldman — along with a whole slew of other firms who created and invested in these dynamite products — would have been bankrupt. And so the real problem is not Goldman’s rapaciousness. It’s the fact that systemic rapacity is being subsidised and protected by the government. Malpractice and malinvestment — such as the current global derivatives mesh which spreads risk around balance sheets like a pandemic — will in nature always eventually be punished by failure. That’s precisely what we saw in 2008, and that’s precisely what governments around the world crystallised and condoned through their bailout programs. Goldman have no incentive to change their business practices under the present conditions, and they won’t.
• Is Syria Near The Tipping Point?
  

CNBC:

• Dodd-Frank Could Shutter May Community Banks: Former FDIC Chair. Community banks have a lot to fear from the Dodd-Frank financial reforms, which could put half of them out of business, former FDIC Chairman Bill Isaac told CNBC Wednesday.
• China Removes Top Leadership Contender Bo From Post. The Communist Party boss of China's southwestern city of Chongqing, Bo Xilai, has been removed, state news agency Xinhua said on Thursday, following a scandal involving a senior aide who took refuge in a U.S. diplomatic mission last month. Bo, who has been a high-profile contender for top leadership, has been the subject of much speculation since Vice Mayor Wang Lijun, his longtime police chief, went to ground in the U.S. Consulate in nearby Chengdu until he was coaxed out and placed under investigation. The incident and the rumors it fanned have blotted Bo's prospects of climbing to the Party's top ruling body when a new generation of leaders is unveiled at a meeting late this year.

IBD:

• Pioneer(PXD) Bets On West Texas Shale Oil To Rival Bakken.
  

NY Times:

• Public Exit From Goldman Sachs(GS) Raises Doubt Over a New Ethic.

Forbes:

• ObamaCare: If Possible, The News Is Getting Worse. ObamaCare is taking on water as we head into the second anniversary since it passed, and the news about the president’s signature legislation gets worse by the day. To mark the law’s two-year anniversary, the House of Representatives is planning a vote to repeal one of the law’s most unpopular provisions — the Independent Payment Advisory Board (IPAB), which many seniors fear will become Medicare’s rationing board. A few days later, the Supreme Court will hear a remarkable six hours of oral argument in the case with 26 states challenging the law’s constitutionality.

Boston Globe:

• Ben & Jerry's Renames Ice Cream Flavor to Support Gay Marriage.

Reuters:

• Guess(GES) Sees Weak Profit; Shares Drop. Guess Inc forecast a weak first-quarter profit as it expects belt-tightening by European governments to hurt consumer spending, sending the U.S. clothing maker's shares tumbling nearly 13 percent in trading after the bell. Consumers in Europe have been hit by austerity measures as governments look to curb spending amid a debt crisis that has threatened to tear the single-currency Euro zone apart. "We expect European consumers, many in the south of Europe, to be affected in the short term by the austerity plans unless something dramatic happens with credit, banking or consumer confidence there," Chief Executive Paul Marciano said on a conference call with analysts. Europe contributed about 40 percent to Guess' total revenue for the fiscal year ended January. The company also expects margins to be pressured early this year by an overhang of last year's rise in product costs.

Telegraph:

• Britain's Inflationary Route to Default. George Osborne’s idea of refinancing the national debt with 100-year gilts, or even gilts issued in perpetuity, is a bit too clever by half.

China Business News:

• Chinese Airlines' 1Q Profit May Drop 50% on Year. Airfares for domestic flights have dropped on year for the first time in three years. Airlines may post core operating losses in Feb. because of lower passenger and cargo volumes and high fuel prices, citing Zhu Feng, an analyst at Industrial Securities Co.

Securities Time:

• China Brokers Limit ChiNext Stock Account Openings. Chinese brokerage halted account openings for inexperienced investors for trading shares listed on the start-up company board, citing brokerage notices.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50 to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 144.50 -2.5 basis points.
  
• Asia Pacific Sovereign CDS Index 118.75 -4.5 basis points.
• FTSE-100 futures +.07%.
  
• S&P 500 futures +.14%.
  
• NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ROST)/.85
• (SCHL)/-.69
• (DOLE)/-.12

Economic Releases
8:30 am EST

• Empire Manufacturing for March is estimated to fall to 17.5 versus 19.53 in February.
• The Producer Price Index for February is estimated to rise +.5% versus a +.1% gain in January.
• The PPI Ex Food & Energy for February is estimated to rise +.2% versus a +.4% gain in January.
• Initial Jobless Claims are estimated to fall to 357K versus 362K the prior week.
• Continuing Claims are estimated to fall to 3408K versus 3416K prior.
  

9:00 am EST

• Net Long-Term TIC Flows for January are estimated to rise to $38.5B versus $17.9B in December.

10:00 am EST

• Philly Fed for March is estimated to rise to 12.0 versus 10.2 in February.
  

Upcoming Splits

• (ALK) 2-for-1
  

Other Potential Market Movers

• The Spain/France bond auctions, EU Finance Ministers meeting, SNB rate decision, (STR) analyst day, (LRN) analyst meeting, (MDU) analyst meeting, (EPL) analyst day, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.
  

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

Stocks Slightly Lower into Final Hour on Falling Euro, Profit-Taking, Global Growth Fears, More Shorting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 15.75 +6.42%
  
• ISE Sentiment Index 84.0 -10.64%
  
• Total Put/Call .80 -5.88%
  
• NYSE Arms .61 -59.19%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 91.63 -2.13%
  
• European Financial Sector CDS Index 153.72 -4.48%
  
• Western Europe Sovereign Debt CDS Index 235.0 -7.5%
  
• Emerging Market CDS Index 225.96 -1.34%
  
• 2-Year Swap Spread 26.25 unch.
  
• TED Spread 39.25 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -60.0 +3.75 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 189.0 +11 bps
  
• China Import Iron Ore Spot $144.30/Metric Tonne +.14%
  
• Citi US Economic Surprise Index 39.90 -1.1 points
  
• 10-Year TIPS Spread 2.38 +4 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating an unch. open in Japan
• DAX Futures: Indicating a +3 open in Germany

Portfolio:

• Slightly Higher: On gains in my Retail and Tech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 trades near session lows despite falling energy prices, less Eurozone debt angst and another surge in market leader (AAPL). On the positive side, Defense, Computer Service, Bank, HMO and Restaurant shares are higher on the day. Oil is falling -1.03%, Lumber is rising +1.3% and Gold is down -2.0%. The 10Y Yield is rising +15 bps to 2.27%. Major Asian indices rose around +1.0% overnight with the exception of Shanghai, which fell -2.6% on comments from Wen Jiabao that home prices are still far from reasonable levels. I continue to believe that investors are overly optimistic on the prospects for a new major aggressive easing cycle out of China. I also think the hard-landing scenario still can’t be ruled out. Major European indices rose around +.5%, led by a +1.3% gain in German shares. The Bloomberg European Financial Services/Bank Index rose +1.64%. The Germany sovereign cds is down -4.6% to 71.50 bps, the France sovereign cds is down -4.4% to 171.80 bps, the Italy sovereign cds is down -4.6% to 366.42 bps and the Saudi sovereign cds is down -5.4% to 120.08 bps. Moreover, the European Investment Grade CDS Index is down -3.6% to 108.08 bps. On the negative side, Utility, Coal, Alt Energy, Oil Service, Disk Drive, Networking, Telecom, Construction, Homebuilding, Gaming, Road & Rail and Airline shares are under pressure, falling more than -1.0%. Copper is down -1.7%. The Transports remain laggards, which continues to be a broad market red flag. As well, the Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its mid-December peak, falling -14.0% over the last 5 days despite investor perceptions that the US economy is accelerating. The Portugal sovereign cds is jumping +3.8% to 1,311.41 bps. The Portugal cds is breaking out technically, but still off its Jan. record high of 1,554.04 bps. Lumber is -4.2% 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 weekly MBA Purchase Applications Index has been around the same level since May 2010. The Baltic Dry Index has plunged over -60.0% from its Oct. 14th high and is now down around -50.0% ytd. China Iron Ore Spot has plunged -20.3% since Sept. 7th of last year. Shanghai Copper Inventories are up +724.% ytd and are still very near their recent all-time high. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. The major averages are consolidating yesterday’s breakout advance in a healthy fashion. Banks are leading the averages again today. The euro and bonds are trading poorly. While these are longer-term positives, an acceleration lower in these two would likely lead to near-term equity turbulence. The ease with which my (AAPL) long still moves higher likely indicates a test of $600 is imminent. For the recent equity advance to maintain traction, I would still expect to see further European credit gauge improvement, a further subsiding of 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-lower into the close from current levels on a decline in the euro, profit-taking, rising global growth fears and more shorting.