Today's Headlines

Bloomberg:

• Spain's Default Risk Is Rising, Buiter Says: Tom Keene. Spain has never been so close to default and Greece, Ireland and Portugal may need further bailouts, Citigroup Inc.(C) chief economist Willem Buiter said. “Spain is the key country about which I’m most worried,” Buiter, a former Bank of England policy maker, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “It’s really moved to the wrong side of the spectrum and is now at greater risk of sovereign restructuring than ever before.”
• Bernanke Says Higher Energy Prices Constitute a Threat to the US Economy. Federal Reserve Chairman Ben S. Bernanke told Congress that higher energy prices may weaken the U.S. economy by sapping consumer spending. “Higher energy prices would probably slow growth, at least in the short run,” Bernanke said today in response to questions from the House Committee on Oversight and Government Reform. Rising fuel prices “create at least short-term inflation pressures, and moreover, they act as a tax on household purchasing power and reduce consumption spending, and that also is a drag on the economy.”
• Oil Climbs After U.S. Inventories Unexpectedly Decline in Report. Oil increased after the U.S. Energy Department said that crude inventories unexpectedly dropped 1.16 million barrels last week. Futures rose as much as 1.4 percent as the report showed supplies fell for the first time in five weeks as imports decreased. Stockpiles were forecast to gain 2.2 million barrels, according to analysts surveyed by Bloomberg News. Crude oil for May delivery climbed 88 cents, or 0.8 percent, to $106.95 a barrel at 1:08 p.m. on the New York Mercantile Exchange. Oil traded at $106.36 a barrel before release of the inventory report at 10:30 a.m. Prices have risen 8.2 percent this year. Brent oil for May settlement rose 13 cents to $124.25 a barrel on the London-based ICE Futures Europe exchange.
  
• Sales of Existing US Homes Hold Steady. Purchases dropped 0.9 percent to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated and the highest since May 2010, a report from National Association of Realtors showed today in Washington. The median price increased over the past year for the first time since November 2010. The number of previously owned homes on the market rose by 100,000 to 2.43 million in February, today’s report showed. At the current sales pace, it would take 6.4 months to sell those houses, up from 6 months in January. Today’s report showed purchases declined in two of four regions, led by a 3.3 percent drop in the Northeast. Sales in the Midwest increased 1 percent. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 34 percent of total demand last month, little changed from January’s 35 percent. Home foreclosures may remain a persistent concern. Filings fell 8 percent in February, the smallest year-over-year decrease since October 2010, as lenders began working through a backlog of seized properties, RealtyTrac Inc. said last week. “February’s numbers point to a gradually rising foreclosure tide,” Brandon Moore, RealtyTrac’s chief executive officer, said in the statement. “That should result in more states posting annual increases in the coming months.”
• China's Closed-Door Politics Risks Blindsiding Traders After Bo. China’s ouster of senior Communist Party official Bo Xilai last week added a new dimension to an opaque leadership transition under way in Beijing this year: news about the succession has become tradable. Speculation of a coup yesterday spread on the Internet, helping spark the biggest jump in credit-default swaps for Chinese government bonds in four months. China’s capital was calm hours after the alleged disruption, with foreign executives including former U.S. Commerce Secretary Carlos Gutierrez attending a meeting in the Zhongnanhai leadership compound.
• BofA's(BAC) McNiff Said to Resign From Mortgage-Trading Unit. JPMorgan Chase & Co. (JPM) and Bank of America Corp., the two biggest U.S. banks, are cutting senior mortgage traders and salesmen amid a decline in the asset-backed securities market, people with knowledge of the moves said. Raphael Gonzalez, JPMorgan’s co-head of trading in subprime mortgages, and John Angelica, a securitized-products salesman, resigned from the New York-based bank within the past four weeks in exchange for severance packages that included all of their deferred stock awards, said the people, who declined to be identified because the terms are private. Roy Kim, who traded adjustable-rate mortgages, left on his own accord with a similar exit deal, the people said.
• Goldman Sachs(GS) Trader Raj Sethi Said to Quit, May Join Hedge Fund. Raj Sethi, a managing director in Goldman Sachs Group Inc.'s commodity-derivatives trading group, quit after 14 years and may join a hedge fund, according to a person with knowledge of the matter.
• Solar's 80% Plunge Hurts Utilities From Hawaii to Spain. On grassy pasture in western Spain, Fotowatio SL is preparing to build a solar plant to supply electricity 25 percent cheaper than a local utility charges for traditional power, a breakthrough that’s sending tremors through the global energy industry. The Spanish developer, which was funded by General Electric Co. (GE), learned how to squeeze construction costs setting up 21 photovoltaic plants in southern Europe during the last six years. By October, its newest unit will begin beating the rate small businesses and homes pay for the first time in Spain. “There are no limits for this technology,” Mariano Berges, chief technology officer at the Madrid-based company and a former natural gas utility engineer, said in an interview. “The decline in prices has been incredible.”

Wall Street Journal:

• High Court Limits Clean Water Act Enforcement. The Supreme Court on Wednesday curbed the government's power to enforce the Clean Water Act, ruling unanimously that landowners can sue to void compliance orders issued by the Environmental Protection Agency.
  

MarketWatch:

• Green Mountain(GMCR) Shares Gain On New Starbucks(SBUX) Deal.

CNBC.com:

• Higher Mortgage Rates May Hamper Obama's Housing Plan. With disappointing results from his foreclosure rescue program and an election year on the horizon, President Obama last fall set his sights on refinancing, specifically helping borrowers who owe far more on their mortgages than their homes are currently worth.

Business Insider:

• Citi: The US Energy Industry Is Going To Grow So Fast, It Will Spark A New 'Industrial Revolution'.
• The $2 Trillion Corporate Cash Hoard Is Only Getting Bigger. (graph)
• The NYPD Says Iran Conducted Surveillance In NYC.
• Limbaugh: Maybe The Conservative Alternative to Romney is... Romney. Earlier this morning we told you that Jeb Bush was endorsing Mitt Romney after his win in the GOP Illinois primary last night. It seemed like a sign that the Republican establishment was rallying around the man they regard as the presumptive nominee. Well this afternoon, shortly after he opened his show, Rush Limbaugh seemed to be coming around to Romney, and trying to take his audience with him. He played a clip from the speeches last night.
  
• How $5 Gas Will Change Every Aspect of the American Economy.
• French Shooter Was Planning More Attacks Before Today's Police Raid and Standoff. Police are laying siege to an apartment in Toulouse where the gunman behind shootings of French paratroopers and Jewish schoolchildren is thought to be hiding, the BBC reports. The shooter is a 24-year-old Frenchman of Algerian origin. Mohammed Merah has claimed that he is linked with al-Qaeda and acted to "avenge Palestinian children".
• The Dallas Fed is Calling for the Immediate Breakup of Large Banks.
  

Zero Hedge:

• Goldman's(GS) Jan Hatzius Says That Americans Haven't Learned Anything From The Crisis.
• Mark Grant's Wake Up Call: Italy Has $211 Billion In Notional Exposure To Derivatives, And Other Trivia.
• A Few Quick Reminders Why NOTHING Has Been Fixed In Europe (And Why LTRO 3 Is Not Coming).
  

Washington Examiner:

• Over 10 Years, Obama's Buffett Rule Would Pay For Less Than 5 Days Of Federal Government Spending.
  

Rolling Stone:

• Bank of America(BAC): Too Crooked to Fail by Matt Taibbi. The bank has defrauded everyone from investors and insurers to homeowners and the unemployed. So why does the government keep bailing it out?
  

Reuters:

• Baker Hughes Sees Q1 Hit On Customers' Shift To Oil. Baker Hughes Inc expects first-quarter profit margins to fall sharply as the disruption of North American clients bailing out from natural gas fields proves rougher than expected for the third-largest oilfield services company. Shares of Baker Hughes fell 4.8 percent.

Bear Radar

Style Underperformer:

• Large-Cap Value -.20%

Sector Underperformers:

• 1) Oil Service -2.20% 2) Alt Energy -1.32% 3) Steel -1.0%

Stocks Falling on Unusual Volume:

• HNP, KEG, BHI, IVN, IMOS, NQ, FSLR, WPRT, CTAS, MYGN, BVSN, TWIN, SBRA, REXX, AGO, AIR, RBN, CXS and GDI
  

Stocks With Unusual Put Option Activity:

• 1) WFM 2) AGO 3) NG 4) BHI 5) USG
  

Stocks With Most Negative News Mentions:

• 1) BHI 2) STI 3) GDI 4) BBT 5) JEF
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.15%

Sector Outperformers:

• 1) Gaming +.46% 2) Computer Services +.46% 3) Biotech +.31%

Stocks Rising on Unusual Volume:

• LNKD, SAI, INXN, SABA, EQIX, ASGN, GMCR, CLNE, TUDO, GOLD, MLNX, GSVC, OPEN, HIG, USG, OSUR, BBY, ARIA and CBVF
  

Stocks With Unusual Call Option Activity:

• 1) KBE 2) UUP 3) XME 4) AGO 5) JBL
  

Stocks With Most Positive News Mentions:

• 1) COF 2) OPEN 3) ABT 4) SYNC 5) SAI
  

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• Gilt Sales to Climb Next Year as Osbourne Fiscal Targets at Risk. Britain will probably sell the second-largest amount of gilts on record in the next fiscal year as the economy stagnates and borrowing costs rise from all-time lows, threatening to derail the government’s debt-cutting plans. The Treasury will sell 180 billion pounds ($286 billion) of bonds, according to the median forecast of 19 of 21 primary dealers that trade directly with the nation’s debt office. That compares with 178.9 billion pounds planned for the fiscal year ending March 31.
• SEC Urges U.S. Congress to Amend Dodd-Frank's Swap-Data Rules. Congress should amend the Dodd- Frank Act to remove barriers to global regulators sharing data about the $708 trillion swaps market, the U.S. Securities and Exchange Commission’s head of international affairs said.
• Oil Rebounds From Biggest Drop in Three Months. Oil rebounded from the biggest decline in three months after a report showed crude stockpiles falling in the U.S. Prices dropped yesterday as Saudi Arabia said it may boost supplies. Futures gained as much as 0.5 percent after sliding 2.3 percent yesterday. U.S. crude supplies shrank by 1.4 million barrels last week, according to the American Petroleum Institute. Oil for May delivery rose as much as 57 cents to $106.64 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.62 at 12:18 p.m. Sydney time. It dropped $2.49 percent yesterday to $106.07, the lowest close since March 15. The April contract, which expired at the end of floor trading, fell $2.48 to $105.61. Front-month prices are 7.9 percent higher this year. Brent oil for May settlement was at $124.40 a barrel, up 28 cents, on the London-based ICE Futures Europe exchange.
• Iron Ore to Drop as China Growth Slows, Biggest Shipper Says. Iron ore may decline 8.5% this year as global output increases and growth in Asian steel production slows, according to a government forecaster in Australia, the world's biggest exporters. Prices may average about $140 a metric ton in 2012 from $153 last year, the Bureau of Resources and Energy Economics said in a quarterly report today.
• Wind Industry Should Mull Tax Credit Phase-Out, Baucus Says. The wind energy industry should think “very seriously” about backing a proposal to phase out a tax credit for building more energy-generating turbines, U.S. Senate Finance Committee Chairman Max Baucus said today. The Montana Democrat said in an interview that phasing out the tax credit might be the most realistic way to keep it from expiring altogether at the end of the year. Companies that invest in wind energy include General Electric Co. (GE), based in Fairfield, Connecticut, and Denmark’s Vestas Wind Systems A/S (VWS).
• Unemployment Rises for Post-9/11 Vets. The unemployment rate for U.S. veterans who’ve served during the wars in Iraq and Afghanistan increased last year, while the rate for non-veterans declined, the Labor Department reported today. The jobless rate for veterans who were in service following the Sept. 11, 2001, attacks was 12.1 percent last year, up from 11.5 percent in 2010, the department’s data show.
• Chinese Developers Set Up Funds as Cash Is Squeezed Amid Curbs. Chinese developers are setting up property funds to diversify their sources of revenue as government real-estate curbs have led to a cash shortage. Fosun International Ltd. (656), a Shanghai-based company with interests in property, retail, mining and pharmaceuticals, is raising money for the second phase of a property fund after getting 3.7 billion yuan ($585 million) for the first, Co- President Fan Wei said at a conference in Beijing yesterday. Sino-Ocean Land Ltd. (3377), a state-owned developer, plans to start a 1 billion yuan fund this year for mergers and acquisitions, Deputy General Manger Li Zhenyu said in an interview. Chinese developers are seeking alternative off-the-balance sheet businesses as credit drained after the government’s two- year efforts to curb speculation in the real-estate market, including higher down payments and mortgage rates, and home purchase restrictions in 40 cities. Relaxing the curbs could cause “chaos” in the market, Premier Wen Jiabao said last week. “Raising money from the private sector opens up options for developers, but it’s a choice out of no choices,” said Albert Lau, Shanghai-based China head and managing director at Savills Plc, citing difficulties developers face to get bank loans and issue bonds. “Funds can join developers as joint venture partners so that to some extent also resolves the money problem.” Chinese developers’ cash ratio dropped to the lowest since 2008 for the third quarter last year, according to data on 139 companies compiled by Bloomberg. The companies face a record amount of debt from non-bank lenders maturing this year and in 2013, according to China International Capital Corp., the country’s biggest investment bank.
• Profits at Chinese Banks Marred by Bad Loans. China’s biggest banks, set to post record profits for a fifth year, may report 2011 results marred by an increase in bad loans as an economic slowdown and faltering property market trigger defaults by borrowers. Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, and its four biggest local rivals may post a 15 percent increase in combined fourth-quarter net income when they report this month, according to analyst estimates compiled by Bloomberg. Their non-performing loans rose for the first time since the third quarter of 2008, the banking regulator said last month.
• Instinet, JPMorgan(JPM) Agree to Link Asia-Pacific Dark Pools. Instinet Inc., a New York-based alternative trading-venue operator, and JPMorgan Chase & Co. (JPM), have agreed to link their Asia-Pacific (MXAP) dark pools, giving clients access to each other’s platforms in Hong Kong, Japan and Australia. Instinet clients can access 22 dark pools, private trading venues that don’t publicly display prices, from 13 brokers, Glenn Lesko, chief executive officer in Asia for Instinet told Bloomberg News in a telephone interview March 20. JPMorgan spokeswoman Marie Cheung confirmed the contents of an Instinet press release announcing the agreement.

Wall Street Journal:

• Romney Handily Wins Illinois Primary. Mitt Romney racked up a decisive victory Tuesday in the Illinois primary, shoring up his claim that he will inevitably take the Republican presidential nomination and dealing another blow to Rick Santorum's bid to block him. With 94% of precincts reporting, Mr. Romney led with 47% to Mr. Santorum's 35%. Rep. Ron Paul of Texas had 9%, and Newt Gingrich trailed with 8%. That gave Mr. Romney, the former Massachusetts governor, fresh momentum heading into a month in which the race moves largely to Northeast and mid-Atlantic states that are friendly terrain for him. While the nominating contest has remained competitive longer than he expected, Mr. Romney has won in every region of the country but the Deep South, including in Ohio, Florida and Virginia—large states that will be battlegrounds when the Republican winner faces Democratic President Barack Obama this fall. The Illinois victory gives him a trifecta in the industrial Midwest, following much narrower wins in Michigan and Ohio.
• A 'Corzine Rule' for Funds. Exchange operators and a futures-industry regulator are working on new rules that would restrict what brokerage firms can do with customer money in the wake of MF Global Holdings Ltd.'s bankruptcy last year. One proposal, which some regulators have dubbed the "Corzine rule" after former MF Global Chairman and Chief Executive Jon S. Corzine, is gaining momentum as more drastic ideas, such as setting up a new customer-insurance program, have run into resistance.
• Banks Seek Delay On 'Volcker Rule'. For Wall Street banks worried about the controversial "Volcker rule," help may be on the way. Senators from both parties are working to give regulators more time to write the rule, potentially easing banks' concerns that their activities will run afoul of the law as a July deadline passes.
• China Growth Woes Weigh on Asian Stocks. Asian stock markets were modestly lower Wednesday as concerns about slowing economic growth in China weighed on market sentiment, with sharp losses in the mining and steel sectors leading declines regional bourses.
• China Warns on North Korea. China again expressed its "concerns and worries" over rocket-launch plans announced by North Korea ahead of an international nuclear summit in Seoul, as Beijing seeks to portray itself as a peacemaker amid rising pressure on Pyongyang from the U.S. and its allies. But North Korea's chief nuclear negotiator warned during a visit to Beijing against any attempt to interfere with the launch, a day after Japan's defense minister said he would consider shooting down a North Korean missile if it poses a danger to that country.
• ObamaCare's Costs Are Soaring by Ron Johnson. We already know the rosy budget estimates used to sell the law were wrong. One year after the passage of ObamaCare, this paper published an op-ed I wrote ("ObamaCare and Carey's Heart") about how America's health-care system saved my daughter's life, and describing how implementing this law will limit innovation, lead to rationing, and lower the quality of care. Now, two years out, I would like to focus on the budgetary disaster. As a candidate, Barack Obama repeatedly claimed that his health-care plan would lower annual family health-insurance premiums by $2,500 before the end of his first term as president. But the Kaiser Family Foundation recently reported that the average family premium has increased $2,200 since the start of this administration. Then there is the higher cost to taxpayers. The CBO's initial estimate in March 2010 of ObamaCare's budget impact showed it saving money, reducing the federal deficit by $143 billion in the first 10 years. But that positive estimate was largely the product of gimmicks inserted into the bill by Democratic leaders to hide the law's true cost.

Zero Hedge:

• Portugal's Tragic Cost of "Remarkable" Troika Compliance.
• The Simple Problems of Too Much US Debt.
• Global Market Needs Canada's Crude.
  

CNBC:

• US Exempts 11 States From Iran Sanctions; China, India Exposed. The United States on Tuesday exempted Japan and 10 EU nations from financial sanctions because they have significantly cut purchases of Iranian crude oil, but left Iran's top customers China and India exposed to the possibility of such steps. The decision is a victory for the 11 countries, whose banks have been given a six-month reprieve from the threat of being cut off from the U.S. financial system under new sanctions designed to pressure Iran over its nuclear program. The list did not, however, include China and India, Iran's top two crude oil importers, nor U.S. allies South Korea and Turkey, which are among the top-10 consumers of Iranian oil.
• Oracle(ORCL) Earnings Beat Street, Sending Shares Higher. Oracle reported quarterly earnings that beat analysts' expectations on sales of new software, sending its shares higher in after-hours trading on Tuesday.

LA Times:

• 100 Million TVs Will Be Internet-Connected by 2016. Soon, the living room TV will become as hyper-connected as the people watching it. A new report from researcher NPD In-Stat predicts that 100 million homes in North America and Western Europe will own television sets that blend traditional programs with Internet content by 2016. These new hybrid devices, capable of displaying interactive content related to TV shows, are a bid to hold the viewer's attention in a device-cluttered world. "The TV people figured out nobody's just watching TV anymore," said Gerry Kaufhold, NPD In-Stat's digital entertainment research director. "They're watching TV with a tablet or a smartphone or a laptop in their hands. They've completely lost control."

CBS News:

• In Only 3 Years, Obama Creates More Debt Than Bush. (graph)
  

USA Today:

• Investor Hedge Fund Claims Cost Citigroup $85M and Counting. Citigroup's tab for reimbursing clients who said the financial giant misled them into investing in risky hedge funds marketed as the safety equivalent of municipal bonds has soared to at least $85 million.

Reuters:

• Spansion(CODE), Nuance(NUAN) Offer New Speech Package for Cars. Spansion Inc and Nuance Communications Inc are offering car makers an improved speech-recognition technology based on their software and semiconductors, the head of Spansion told Reuters.
• Italy's Monti Says Labour Reform Ready, Union Vows Protests. Italian Prime Minister Mario Monti set a collision course with the country's biggest trade union after talks on a historic reform to employment protection law failed to produce a deal. The left-wing CGIL union, which has six million members, will meet on Wednesday to decide how to protest against a reform which its leader called an attack on workers and an attempt to solve Italy's labour problems by "easy firing".
• Electric Car Revolution Faces Increasing Headwinds.
• CBOE Regulation Head Exits Amid SEC Probe. The head of the Chicago Board Options Exchange's market-regulation department has left the company, the second compliance official to leave the exchange amid a regulatory investigation, the Wall Street Journal reported.
• Fed May Need to Raise Rates This Year - Kocherlakota. The U.S. Federal Reserve may need to start moving away from its near-zero interest rate policy as soon as this year, if unemployment continues to drop and inflation threatens to rise, a top Fed official said on Tuesday. "I would see an argument for initiating that exit in 2012 or 2013," Narayana Kocherlakota, president of the Minneapolis Federal Reserve Bank, told reporters after a speech at Washington University in St. Louis.

The Guardian:

• Up to 40% of High Street Shops Could Close Over Next 5 Years. Four out of 10 shops will have to shut in the next five years as consumers turn their backs on traditional stores in favour of online shopping, according to a report which casts more doubt on the future of the beleaguered British high street.

Evening Recommendations
Jefferies:

• Rated (EQIX) Buy, target $165.
• Rated (RAX) Buy, target $64.
  
• Rated (INXN) Buy, target $21.50.

Night Trading

• Asian equity indices are -.75% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 150.0 +3.5 basis points.
  
• Asia Pacific Sovereign CDS Index 114.0 +3.5 basis points.
• FTSE-100 futures +.18%.
  
• S&P 500 futures +.21%.
  
• NASDAQ 100 futures +.16%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GIS)/.55
• (ATU)/.37
• (DFS)/.94
• (FRED)/.24
  

Economic Releases
8:30 am EST

• Existing Home Sales for February are estimated to rise to 4.61M versus 4.57M in January.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,200,000 barrels versus a +1,750,000 barrel gain the prior week. Distillate supplies are estimated to fall by -1,500,000 barrels versus a -4,682,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -2,000,000 barrels versus a -1,410,000 barrel decline the prior week. Finally, Refinery Utilization is estimated unch. versus a -1.2% decline the prior week.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Portugal Bond Auction, China HSBC Manufacturing PMI and the weekly MBA mortgage applications report could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 100% net long heading into the day.

Stocks Lower into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Profit-Taking, More Shorting

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 15.38 +2.26%
  
• ISE Sentiment Index 87.0 -15.53%
  
• Total Put/Call .88 +3.53%
  
• NYSE Arms .80 -41.84%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.40 +4.34%
  
• European Financial Sector CDS Index 138.99 +.82%
  
• Western Europe Sovereign Debt CDS Index 223.41 +1.68%
  
• Emerging Market CDS Index 227.13 +5.10%
  
• 2-Year Swap Spread 26.75 +1.5 basis points
  
• TED Spread 37.75 -1.5 basis points
  
• 3-Month EUR/USD Cross-Currency Basis Swap -54.75 +5.0 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .10% +2 bps
  
• Yield Curve 197.0 -2 bps
  
• China Import Iron Ore Spot $144.80/Metric Tonne +.07%
  
• Citi US Economic Surprise Index 30.80 -2.3 points
  
• 10-Year TIPS Spread 2.44 +1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating a -76 open in Japan
• DAX Futures: Indicating a +39 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech, Retail and Medical sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 trades slightly lower, but near session highs despite recent gains, rising Eurozone debt angst and rising global growth fears. On the positive side, Internet, Bank, I-Banking, Retail and Airline shares are especially strong, rising more than +.5%. Financial shares are trading very well again today. The UBS-Bloomberg Ag Spot Index is falling -1.1%, Gold is down -.9% and Oil is down -2.1%. The Portugal sovereign cds is down -4.2% to 1,224.92 bps. Moreover, the European Investment Grade CDS Index is down -3.8% to 94.67 bps. Weekly retail sales rose +3.3% this week versus a +3.1% gain the prior week. Retail sales are improving, but are at still sluggish rates for a recovery. On the negative side, Coal, Oil Tanker, Energy, Oil Service, Steel, Hospital, HMO, Construction and Road & Rail shares are under meaningful pressure, falling more than -1.50%. The Transports and Small-caps are underperforming. Lumber is down -3.6% and Copper is down -1.8%. Major Asian Indices were mostly lower overnight, led down by a -1.4% decline in China. China's ChiNext Index is down -4.6% in 5 days. Major European indices fell around -1.25% today, led lower by a -1.4% decline in Germany. The Bloomberg European Financial Services/Bank Index fell -1.6%. The Germany sovereign cds is rising +4.65% to 70.0 bps, the France sovereign cds is up +5.55% to 164.12 bps, the UK sovereign cds is rising +5.3% to 61.58 bps, the Italy sovereign cds is gaining +2.5% to 357.83 bps, the Japan sovereign cds is gaining +4.4% to 107.25 bps and the Spain sovereign cds is rising +2.9% to 409.67 bps. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its mid-December peak despite investor perceptions that the US economy is accelerating. Lumber is -8.3% since its Dec. 29th high despite the better US economic data, 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 around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -20.5% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +754.0% ytd. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. US stocks continue to trade very well as they consolidate recent gains in a healthy fashion and ignore almost all negatives. The most cyclical shares underperformed significantly today. This trend will likely intensify as the year progresses. 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-higher into the close from current levels on a bounce in the euro off the lows, falling energy prices, short-covering, more financial sector optimism and investor performance angst.

Today's Headlines

Bloomberg:

• Spain's Castilla Said to Sell Debt as Rajoy Backs Regions. Spain’s region of Castilla y Leon is selling bonds in the third public transaction by a regional administration in the past week after Prime Minister Mariano Rajoy offered the states loans to help them meet liabilities. The 2014 bonds issued in euros by Junta de Castilla y Leon will be priced to yield 210 basis points more than Spanish government bonds, according to a banker involved in the transaction, who declined to be identified before the transaction was completed. Aragon and the Madrid region issued debt last week, according to Bloomberg data. Spain’s regions, which control more than a third of public spending, have been locked out of capital markets, forcing them to sell debt to their citizens and leave bills to suppliers unpaid. The central government is offering regions credit lines to help them meet bond redemptions and pay suppliers, a move Moody’s Investors Service said yesterday was positive for the states. Rajoy’s government created a credit line of as much as 15 billion euros ($19.8 billion) via the Official Credit Institute on Feb. 3, part of which was aimed at helping regions meet bond redemptions. It approved on March 2 another 35 billion euros of loans, mostly through the country’s banks, to enable regions and town halls to pay suppliers.
  
• Pimco's Kashkari Says Greece, Portugal to Need More Bailouts. Pacific Investment Management Co.’s Neel Kashkari, who heads global equities at the Newport Beach, California-based investment firm, said Greece and Portugal will need additional bailouts. “We don’t think that Greece will actually be able to deliver on the austerity measures they’re promising,” Kashkari said today in an interview on Bloomberg Television’s “InBusiness with Margaret Brennan.” “Risks in Europe remain, so we’re being very selective.” Europe’s approval of a 130 billion-euro ($172 billion) rescue package for Greece, the second such bailout since 2010, doesn’t solve the region’s sovereign-debt crisis, Kashkari said. While U.S. economic indicators have been improving, risks of further “shocks” coming out of Europe and slowing growth in the emerging markets are leading Pimco to buy stocks only selectively, he said.
• Greece's Third Bailout Seen in Debt With Junk Grade: Euro Credit. Greece’s bonds and credit ratings are factoring in a third bailout for the nation that analysts and investors say will require greater concessions from its international creditors. Within a week of euro-area member states giving their formal approval to a second bailout package for Greece, the International Monetary Fund said the country may require additional funding or a further debt restructuring. Pacific Investment Management Co., which runs the world’s biggest bond fund, said it remains “cautious” on euro-area government debt even after the largest-ever sovereign refinancing because the risk remains that Greece will leave the single-currency area. It’s still a very steep mountain to climb,” said Harvinder Sian, a senior fixed-income strategist at Royal Bank of Scotland Group Plc in London. The restructuring deal “doesn’t do anything to put Greece on a sustainable path,” he said. “A third bailout will become necessary.” The price of Greek government bonds maturing in February 2042 that were provided as part of its debt exchange was at 21.48 cents on the euro at 8:04 a.m. London time, with yields at 15.02 percent. Standard & Poor’s said on March 15 it rated the securities CCC, its fourth rank above default, citing questionable growth prospects, a weakening political consensus to implement budget cuts, and a “still large” debt burden.
• Oil Drops From Three-Week High on Speculation of Supply, China Demand Worries. Oil dropped on forecasts that U.S. crude stockpiles increased to a six-month high and on signals that economic growth and fuel demand will slow in China. Oil for April delivery fell $1.91, or 1.8 percent, to $106.18 a barrel at 11:47 a.m. on the New York Mercantile Exchange. The contract gained 1 percent to $108.09 a barrel yesterday, the highest settlement since March 1. Futures are up 7.4 percent this year. The April contract expires today. More actively traded May futures declined $1.99, or 1.8 percent, to $106.57 a barrel. Brent oil for May settlement decreased $1.63, or 1.3 percent, to $124.08 a barrel on the London-based ICE Futures Europe exchange.
• Goldman's(GS) Russia Exodus Grows as Workman Quits for Otkritie. Michael Workman, Goldman Sachs Group Inc. (GS)’s executive director in fixed income in Moscow, quit to join Otkritie Financial Corp., a month after the U.S. bank’s co-heads and chief trader in the Russian capital left.
• IRS Flags Almost 2 Million Tax Returns in Anti-Fraud Efforts. The Internal Revenue Service has identified and started reviewing almost 2 million tax returns for possible fraud, Deputy Commissioner Steven Miller told a U.S. Senate subcommittee.
• U.S. Housing Heals as Starts Near Three-Year High: Economy. Builders broke ground on 698,000 homes at an annual rate, in line with the median forecast of economists surveyed by Bloomberg News and down 1.1 percent from a January pace that was stronger than previously reported, Commerce Department figures showed today in Washington. Building permits, a proxy for future construction, climbed to the highest level since October 2008.
• China's Stocks Fall Most in Almost a Week on Profit Concerns. “Higher energy costs and falling profits may worry investors that the economy is slowing even further,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. The Shanghai Composite Index lost 33.35 points, or 1.4 percent, to 2,376.84 at the close. The CSI 300 Index declined 1.7 percent to 2,584.45.
• China Auto Sales May Miss Growth Goal on Economy, Fuel Costs. China's vehicle sales this year will probably miss their 8 percent growth forecast as the slowing economy and rising fuel costs curb buying, said an official at the state-backed auto association. Bayerische Motoren Werke AG, Daimler AG and Volkswagen AG shares dropped. Total vehicle deliveries may fail to increase by even 5 percent because of the "difficult" economic backdrop, Gu Xianghua, deputy secretary general of the China Association of Automobile Manufacturers, said today, citing his personal opinion. Demand for commercial automobiles may be affected the most, falling as much as 8 percent, Gu said. "The slowing macro-economy will make it difficult to secure loans for commercial vehicles, restrictions on car ownership such as in Beijing, and car ownership costs such as fuel and parking fees are increasing," said Gu, who was speaking at a conference in the eastern Chinese port city of Qingdao. "All these factors will have an impact on car buying in China." Chinese auto sales, which jumped more than fivefold in the last decade, may increase at a slower pace than the economy if Gu's projection is realized. Passenger-car sales had their worst two-month start in seven years in January and February, declining 4.4 percent to 2.37 million units, according to the association's data.
• Afghan Night Raids May Need Warrants Under U.S. Offer to Karzai. Night raids involving U.S.-led forces in Afghanistan might require court warrants under a compromise being considered to remove a hurdle to partnership with the Afghan government after most American troops withdraw, a U.S. defense official said.
• Free Lunches Pushing U.S. to Involvency, Columbia's Mundell Says. Political competition for votes and lack of fiscal discipline are pushing the world’s largest economy toward solvency issues, according to the Nobel Prize- winning economist Robert Mundell. “The public is looking for free lunches, and the political competition for votes makes the politicians offer them free lunches,” Mundell, a professor of economics at Columbia University, said on Bloomberg Radio interview with Tom Keene and Ken Prewitt. “That’s what gets us in to the difficulties of insolvency.” The U.S. plans to finance a budget deficit forecast to exceed $1 trillion for a fourth year and outstanding U.S. marketable debt expanded to $10 trillion in February. “You could have fiscal stimulus back in the day of Keynes, when the government was a small proportion of gross domestic product and there was no insolvency problem,” he said, referring to British economist John Maynard Keynes. “You can’t just issue more bonds to pay for deficits and expect it to solve the employment problem.”

Wall Street Journal:

• Copper Another Victim of China Worries. Copper futures sank amid worries that higher energy prices could sap global economic growth and on renewed concerns about China's economic slowdown. The most actively traded contract, for May delivery, was down 8.40 cents, or 2.2%, at $3.8240 a pound in Tuesday morning trade on the Comex division of the New York Mercantile Exchange. Copper futures were roiled amid comments from two of the world's largest mining companies that growth in China, the world's second-largest economy, is slowing. The president of BHP Billiton's BHP -3.75% iron-ore division, Ian Ashby, cautioned that China's demand for iron ore will drop "to single digits, if it is not already there."
• The GOP Budget and America's Future by Paul Ryan. The president's budget gives more power to bureaucrats, takes more from taxpayers to fuel the expansion of government, and commits our nation to a future of debt and decline.
  

MarketWatch:

• S&P Indices, ISDA Launch 2 New Credit Default Swap Indices Measuring the Credit Quality of US and European Finance Sectors.

CNBC.com:

• Economy 'Very Challenging' as Interest Rates Rise: Bernanke. A recent rise in interest rates has caught the attention of the Federal Reserve, whose chief sees an economy that is showing gradual improvement.
• Strong Recovery May Speed 2014 Rate Hike: Fed Nominee. One of President Barack Obama's nominees to the Federal Reserve Board said on Tuesday it would be appropriate for the central bank to start raising interest rates before 2014 if the recovery accelerates.

Business Insider:

• A Black Militia Group Says It Plans To Arrest The Neighborhood Watchman Who Shot A Black Teenager.
• You're Nuts If You Think There's A Better Tablet Than The iPad. (review)
• Cheap Natural Gas is Having a Big Effect on American Industry.
  
• YARDENI: The NY Fed President Is Suffering From The Same Behavioral Disorder As UFO Cult Followers From The 1950s.
  

Zero Hedge:

• US Taxpayers Commence Bailing Out ECB, With Greece As Intermediary.
• Will China's 'Soft' Landing Be 'Hard' on Global Exporters?
• $4 Gas Average Is Here. (graph)
• Obama Adviser, And Goldman(GS) Client, Gene Sperling Filibusters CNBC With "Shared Sacrifice" Speech In Response To Ryan Budget.

New York Times:

• U.S. to Place Tariffs on Solar Panels From China. The tariffs were smaller than many industry executives had expected — 2.9 to 4.73 percent — which could blunt their effect on sales. But the decision was nonetheless likely to be seen as a milestone because of its implications for international trade, renewable energy and American manufacturing.
  

US News:

• Why War With Iran Is Likely by James Rickards. Uncertainty reigns because of doubts about the sustainability of the recovery without continual doses of more zero-cost money from the Federal Reserve. The last thing capital markets need is an exogenous shock in the form of war in a critical part of the world, but that is exactly what is coming.

NY Post:

• Obama's Angry Adviser. Back when he agreed to advise the Obama administration on economics, General Electric CEO Jeff Immelt told friends that he thought it would be good for GE and good for the country. A life-long Republican, Immelt said he believed he could at the very least moderate the president’s distinctly anti-business instincts. That was three years ago; these days Immelt is telling friends something quite different. Sure, GE has managed to feast on federal subsidies, particularly the “green-energy” giveaways that are Obamanomics’ hallmark. But Immelt doesn’t think he’s had anywhere near as much luck moderating the president’s fat-cat-bashing, left-leaning economic agenda of taxing businesses and entrepreneurs to pay for government bloat. Friends describe Immelt as privately dismayed that, even after three years on the job, President Obama hasn’t moved to the center, but instead further left. The GE CEO, I’m told, is appalled by everything from the president’s class-warfare rhetoric to his continued belief that big government is the key to economic salvation. Or, as one friend recently put it to me, “Jeff thought he could make a difference, and now realizes he couldn’t.” Immelt’s conversion from public Obama supporter to a private detractor is important: It shows how even businessmen who feast off his subsidies worry about his overall economic agenda and its long-term impact on the economy.

Reuters:

• Angry Birds Partners With Major U.S. Retail Chain. Angry Birds maker Rovio is teaming up with a major U.S. retail chain to put its branded toys, books and T-shirts in dedicated areas of thousands of stores nationwide, the Finnish company's marketing chief told Reuters on Tuesday.

Financial Times:

• Slower China: End of the Commodity Super-Cycle? (graphs)
  

Der Spiegel:

• Poor Western German Cities Fed Up With Funding East. Closed swimming pools, potholed streets, run-down buildings. Many western German cities, especially in the industrial Ruhr rust belt, are looking worse for wear after years of neglect in which they've had to transfer billions funds to help rebuild the former communist east. Now their mayors want to stop paying.

FT Deutschland:

• German cities and towns are finding it increasingly difficult to obtain loans as banks begin to doubt the creditworthiness of municipalities previously deemed to offer riskless returns, citing banking executives. Several banks are analyzing the possibility of municipal defaults as the Greek sovereign debt crisis alters their risk perceptions.