Today's Headlines

Bloomberg:

• Merkel Said to Say She Sees German Yields Rising as Crisis Ebbs. Chancellor Angela Merkel told lawmakers that she expects German borrowing costs to rise as the debt crisis ebbs and the country’s status as a haven wanes, according to two party officials who took part in the meeting. Merkel made her comments to lawmakers of her Christian Democratic Union at a regular meeting in parliament in Berlin today, according to the officials, who spoke on condition of anonymity because the briefing was private.
• Corporate Bond Risk Falls in Europe on Recovery Support Bets. The cost of insuring against default on European corporate debt fell for a second day on speculation policy makers will bolster support for the economic recovery. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 16 basis points to 574.5, according to JPMorgan Chase & Co. at 10:30 a.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 2.75 basis points to 115. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell 3.5 basis points to 200 and the subordinated index declined seven to 316.
• Libor Flatlines as Europe-Wary See Stress: Credit Markets. Stresses in the global financial system have stopped easing as European policy makers signal they’re unlikely to extend a third round of unlimited loans to the region’s banks and as bond yields in Spain and Portugal begin to rise again. The three-month London interbank offered rate has held at about 0.47 percent every day in March, after sliding from this year’s high of 0.58 percent on Jan. 3. Measures from interest- rate swap spreads to the relative yields on short-term bonds sold by the world’s biggest banks also show the health of the financial system isn’t improving.
• Barclays Gas ETN(GAZ) Plummets as Credit Suisse VIX Note(TVIX) Crashes. A Barclays Plc (BARC) exchange-traded note that traded 134 percent above the value of the natural-gas index it’s tied to lost 42 percent of the premium in three days as investors exit funds that diverge from underlying assets. The iPath Dow Jones-UBS Natural Gas Total Return Sub-Index ETN has plunged 30 percent since March 21 as its benchmark index decreased 7.1 percent, according to data compiled by Bloomberg.
• Egypt Parties Quit Constitution Panel Citing Islamist Dominance. Some of Egypt’s leading secular parties and politicians quit a panel to draft a constitution, adding to tensions over the country’s political transition that have weakened the economy. Among those who pulled out were the Free Egyptians, founded by billionaire Naguib Sawiris, the Egyptian Social Democrats, and prominent lawmakers including Mohamed Abu Hamed and Amr Hamzawy, the state-run Middle East News Agency reported today. They criticized what they said were attempts by the Muslim Brotherhood to monopolize selection of members, MENA said. The withdrawal, a day before the committee was to meet for the first time, adds to turmoil surrounding Egypt’s transition to democracy which has set back the economy’s recovery after last year’s uprising against Hosni Mubarak.
• Consumer Confidence Falls in March. The Conference Board’s index was 70.2 this month, in line with the median forecast in a Bloomberg News survey, down from a revised 71.6 reading in February, according to the New York- based research group.

Wall Street Journal:

• Justices Challenge Government Over Health Law. The Supreme Court's five conservative justices on Tuesday sharply challenged the Obama administration's arguments for the health-care law, with Justice Anthony Kennedy saying the government has a "very heavy burden of justification" for the measure's requirement that people carry health insurance or pay a penalty. But Justice Kennedy, a perennial swing vote on the court, also asked some skeptical questions of the law's challengers, leaving the fate of President Barack Obama's signature legislation in doubt
  

CNBC.com:

• ObamaCare Will Bankrupt States. If the U.S. Supreme Court finds the Obama health insurance law constitutional "it's going to basically bankrupt the states," Texas Gov. Rick Perry told CNBC Tuesday. The former Republican presidential candidate said his state is considering its options if the constitutionality is upheld. Perry claimed the Obama administration "misrepresented the cost of this bill" for the program when President Barack Obama said Texas would pay $27 billion over the next 10 years. "Those numbers are going to escalate," Perry predicted. "The cost of the bill to the states is going to be absolutely stunning."

Business Insider:

• A Bunch of the Prop Traders That Left Goldman(GS) to Start Hedge Funds Are Getting Smoked.
• Read These Questions, And You'll See Why Today Was A Disaster For Obamacare.
• Chesapeake Energy(CHK) CEO: In a Few Years, We'll Be Able to Say 'To Hell With OPEC'.
• How Canada Became One Of The World's Largest Oil Players In Just 10 Years.
• House Dems Have Proposed Raising Taxes By 40%.
  

Zero Hedge:

• Case Shiller Finds Home Prices Declined For 9th Consecutive Month In January. (graphs)
• Germany: The Final Frontier... Whose True Debt/GDP Is Now 140%.
• Italian Debt - Not Kicking The Can Too Far.
  

Seeking Alpha:

• Housing Bottoms And The Elusive Recovery.

CNN:

• Goldman(GS) Losing Private Equity Exec. Gene Yoon is leaving Goldman Sachs (GS) to manage a new $500 million private equity fund, Fortune has learned. Sources say that the new effort will officially launch in May, and that it will be bankrolled by a European family office.

market folly:

• 2012 Hedge Fund Compensation Report. Here's some key takeaways from 2012:
  

The Hill:

• Toobin: Obama Healthcare Reform Law 'in grave, grave trouble'. A top legal analyst predicted Tuesday that the Obama administration's healthcare reform legislation seemed likely to be struck down by the Supreme Court. Jeffrey Toobin, a lawyer and legal analyst, who writes about law related topics for The New Yorker said the law looked to be in serious "trouble." "This law looks like it's going to be struck down," Toobin said Tuesday on CNN. "I think this law is in grave, grave trouble."

Reuters:

• Higher Gasoline Prices Could Stem Travel Plans - Survey. Rising gasoline prices in the United States could lead business and leisure travelers to cut back on travel plans, which in turn could have implications for airlines, hotels and retailers, a survey found. A survey of some 2,500 people by the U.S. Travel Association earlier this month found that higher gas prices would affect the summer travel plans of 54 percent of vacationers who planned to go by car. Among business people, 26.8 percent said rising fuel prices would alter their summer travels.
• Harbinger Capital II Down 29.6% in February - Sources. Philip Falcone's Harbinger Capital Partners Fund II lost more money in February, due largely to the fund's big investment in ailing telecom company LightSquared, two sources familiar with the numbers said. The fund declined 29.6 percent in February, leaving it down 26.7 percent for the first two months of the year.

AP:

• Egypt's Brotherhood Considering Presidential Run. Egypt's Muslim Brotherhood was debating Tuesday whether to field a candidate in upcoming presidential elections, a much-anticipated decision that would signal whether the fundamentalist group intends to escalate or defuse rising tensions with the nation's other political players. The Brotherhood has emerged as the most powerful political group since Hosni Mubarak was ousted last year, capturing nearly 50 percent of the seats in Egypt's first post-uprising parliamentary elections. It's increasing grip on power has fueled concerns among liberals and secularists of the Islamist group's intentions and whether it aims to govern alone, controlling both the parliament and the presidency. More than 100 members of the Brotherhood's senior legislative council were meeting Tuesday to decide on fielding a presidential candidate, according to a statement on the group's website. For months, the Brotherhood pledged not to contest the presidency, but recently officials from the group have reconsidered, opening the door to a possible presidential run.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.18%

Sector Underperformers:

• 1) Education -4.97% 2) Oil Service -2.28% 3) Energy -1.04%

Stocks Falling on Unusual Volume:

• MMR, TOT, LPI, WFT, NBR, BK, CALL, MAPP, APOL, STRA, APEI, CALL, CPLA, EXPE, SCOR, VRA and STC
  

Stocks With Unusual Put Option Activity:

• 1) MAPP 2) LEN 3) TOT 4) MMR 5) TSLA
  

Stocks With Most Negative News Mentions:

• 1) TRGT 2) Z 3) SCHL 4) MMR 5) MA
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.06%

Sector Outperformers:

• 1) Homebuilders +2.64% 2) Steel +.80% 3) Networking +.70%

Stocks Rising on Unusual Volume:

• SINA, WNC, CIEN, FNSR, CIG, PFE, DK, HOGS, KIOR, VDSI, CVV, TSLA, JDSU, YNDX, CROX, QLIK, RCII, SOHU, EPAM, YELP, MCP, USG, BCEI and LEN
  

Stocks With Unusual Call Option Activity:

• 1) KBE 2) TIE 3) UA 4) ESI 5) MMR
  

Stocks With Most Positive News Mentions:

• 1) BWA 2) JEC 3) RCII 4) LEN 5) AAPL
  

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg:

• Draghi Says Governments Must Continue to Take Decisive Measures. European Central Bank President Mario Draghi said euro-region governments should continue to take “decisive measures” after the central bank’s liquidity provisions helped restore investor confidence. While the ECB’s injection of more than 1 trillion euros ($1.3 trillion) into the banking system has calmed markets, “no single institution can carry the burden of addressing a set of challenges that are simultaneously economic, financial and fiscal,” Draghi said in Berlin yesterday. “The current stabilization should not make us pause in our responses.” Finance ministers from the 17 nations will meet in Copenhagen on March 30 and Chancellor Angela Merkel gave her first indication yesterday that she is prepared to allow an increase in the debt-crisis firewall, saying that Germany could let the temporary and permanent rescue funds run in parallel. Merkel cited “fragility” in Spain and Portugal as she revealed Germany’s position on addressing the future backstop.
• BOE Says European Debt Concerns Persist as Yields Stay Elevated. The Bank of England said investors remain concerned about the euro-area outlook even after measures by policy makers helped reduced some tensions in markets. “Concerns about the indebtedness and competitiveness of some euro-area countries persisted and remained a key influence on financial markets,” Chief Economist Spencer Dale wrote in the bank’s Quarterly Bulletin, published in London today. Still, in the three months to March 9, “financial-market sentiment improved considerably over this period amid a range of actions by policy makers, both in the U.K and abroad.” Italian Prime Minister Mario Monti said over the weekend that Spain’s struggle with its finances could revive contagion in Europe as finance ministers prepare a deal to strengthen the region’s firewall. The Bank of England noted in the bulletin that sovereign bond yields in some countries remain “elevated.”
• Spanish Banks' Bond Buying Can't Cap Funding Costs: Euro Credit. Spanish banks are using loans from the European Central Bank to buy domestic government debt in a recycling exercise that hasn't stopped 10-year yields from climbing back above 5% in recent weeks. Investments in government debt by Spanish banks climbed to a record 230 billion euros in January from 178 billion euros in November, a jump of 29%, central bank figures show. "The increase in debt purchases by the Spanish banks has been massive and it's clear it's coming from the LTRO," said Tobias Blattner, an economist at Daiwa Capital Markets in London, referring to the ECB's loans program. "The key point is that Spanish banks can't keep up the pace because the situation is still so volatile and prone to changes of sentiment."
  
• Ackermann Says Spanish Contagion 'Not Off Table,' N-TV Reports. Deutsche Bank AG (DBK) Chief Executive Officer Josef Ackermann said that while the solution to Greece’s crisis reduced the risk of contagion to Spain and Portugal, such a scenario is “not completely off the table,” N-TV reported. Europe has “taken good steps” in solving its debt crisis, N-TV cited Ackermann as saying in an interview. He added that some “fundamental tasks” remain, with the biggest being in mid-term growth and unemployment, N-TV reported. If Europe’s debt problems are solved in five years, it would represent a “fantastic achievement,” Ackermann also told the news channel. While Europe has “all chances and a huge potential” to find a solution to the debt crisis, “brave steps” are needed, the TV station cited him as saying.
• Libor Flatlines as Europe-Wary See Stress Signs: Credit Markets. Stresses in the global financial system have stopped easing as a European Central Bank official signals they're unlikely to extend a third round of unlimited loans to the region's banks and as bond yields in Spain and Portugal begin to rise again. The 3-month libor has held at about .47 percent every day in March, after sliding from this year's high of .58 on Jan. 3. Measures from interest-rate swap spreads to the relative yields on short-term bonds sold by the world's biggest banks also show the health of the financial system isn't improving.
• China's Industrial Company Profits Fall 5.2% on Exports. Chinese industrial companies had their first January-February profit decline since 2009 as slowing exports and a government campaign to cool property prices damped earnings. Net income dropped 5.2 percent from a year earlier to 606 billion yuan ($96 billion), the National Bureau of Statistics said on its website today. That compared with a 34.3 percent gain in the first two months of 2011. The bureau didn’t release a figure for January because of a weeklong Chinese New Year holiday that disrupted production. “Earnings growth will continue to slow as companies are squeezed from both ends: slowing investment demand and elevated costs,” Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., said before today’s release. “The government’s property curbs are having a chain effect by slowing housing investment and demand for all related goods such as steel, cement, construction machinery and electric appliances.”
  
• FHA Bailout Risk Looming Larger After Guarantee Binge: Mortgages. The Federal Housing Administration won’t be able to earn its way to financial health this year, increasing the chance it will need a taxpayer bailout, based on an updated forecast from Moody’s Analytics, which provides the agency’s housing-market analysis. The U.S. government mortgage-insurer, which guarantees $1.1 trillion in home loans, had been counting on “robust growth” in home prices to help rebuild its insurance fund after paying out $37 billion to cover defaults the past three years, according to its annual report to Congress, filed in November. It won’t get that growth until 2014, according to the latest outlook from Moody’s Analytics. Prices will fall 3 percent in fiscal 2012 before growing 1.4 percent in 2013 and 6.5 percent in 2014, said Celia Chen, a Moody’s Analytics housing economist who updated her estimate after providing the housing-market forecast for the FHA’s annual actuarial report. “The FHA’s economic projections are surreal,” said Andrew Caplin, a New York University economics professor who has testified to Congress on the agency’s finances. “They must believe there will be very few readers in Congress able to critically review such a complex report.”
• U.S. House Backs Exemptions to Swaps Rules in Bipartisan Vote. The U.S. House voted to exempt manufacturers and commercial swap-users from collateral requirements and ease regulations on inter-company trades in a bid to amend the Dodd-Frank Act financial overhaul. The collateral measure, approved 370-24 in Washington, is designed to bar regulators from requiring so-called end-users to post margin. MillerCoors LLC has sought an exemption for swaps it uses to hedge the price of aluminum, while Baltimore-based Constellation Energy Group (CEG) uses derivatives to hedge volatility in physical energy markets.
• Netanyahu Sees Strike on Iran's Nukes as Worth the Risk.
• Obama Says 'Bad Actors' Trying to Get Nuclear Material. President Barack Obama said there are “still too many bad actors” in the world trying to get their hands on nuclear material, which could result in a terror attack that kills large numbers of people. “These dangerous materials are still vulnerable in too many places,” Obama said today at the opening session of the Nuclear Security Summit in Seoul, which has drawn more than 40 world leaders. “It would not take much, just a handful or so of these materials, to kill hundreds of thousands of innocent people and that’s not an exaggeration, that’s the reality that we face.”
• Critics Seize on Obama's Promise of Post-Election 'Flexibility' to Russia. (video) Republicans questioned whether President Barack Obama was being forthright with Americans after he was heard telling Russian President Dmitry Medvedev that he will have more flexibility to negotiate differences over missile defense after the November election. In remarks that were picked up by microphones as Obama and Medvedev concluded a one-on-one meeting in Seoul, South Korea, Obama said he needs Russia’s President-elect Vladimir Putin, who takes office in May, to “give me space” to deal with Russian objections to a planned U.S. missile-defense system in Europe. “This is my last election, and after my election I have more flexibility,” Obama said to the Russian leader. “I understand,” Medvedev replied in English, adding he will “transmit this information to Vladimir.”
• EPA Said to Be Close to Tightening U.S. Greenhouse-Gas Limits. The Environmental Protection Agency is close to issuing the first limits to cut U.S. greenhouse gases from power plants, with an announcement possible as soon as tomorrow, according to people familiar with the matter. The rules from President Barack Obama’s administration would set emissions for all power plants at the level established for a natural-gas plant, or about half what is released from a coal-burning facility. Any new coal plants would need expensive carbon-capture equipment, according to the people, who declined to be identified before an announcement. “It will make it nearly impossible to build a new coal plant,” Michael Brune, executive director of the Sierra Club, said in an interview. Environmental groups such as the Sierra Club are pressing the Obama administration to issue tight standards to head off an increase in global warming that they warn could be catastrophic. “If old King Coal isn’t dead already, he’s certainly teetering toward life support,” said Frank O’Donnell, president of Clean Air Watch in Washington.

Wall Street Journal:

• JPMorgan(JPM) Tops The MF Global Witness List. A House subcommittee said a top lawyer at J.P. Morgan Chase & Co. will testify at a highly anticipated hearing Wednesday into the collapse of MF Global Holdings Ltd. Diane Genova, a deputy general counsel at J.P. Morgan, was one of seven witnesses announced by the House Financial Services subcommittee on oversight and investigations. The New York bank declined to comment Monday on Ms. Genova's likely testimony. J.P. Morgan hasn't previously been questioned by lawmakers about its ties to MF Global.
• Economist: World Bank Suggestions for China Reform "Garbage". The World Bank’s 2030 report on the reform priorities for the Chinese economy is “mainly garbage” according to an economist at Beijing’s Renmin University. “The reforms they propose make sense, but they have no idea where to start” Tao Ran, a professor with the Renmin University School of Economics at said in an interview with China Real Time on Thursday.
• Planned Pipelines to Rival Keystone XL. Two major energy companies are planning to build new pipelines that will move as much as 850,000 barrels of crude oil a day from Canada to refineries along the Gulf Coast by mid-2014, in the latest effort to cope with a surge of oil production in North America. The separate projects, planned by Houston-based Enterprise Products Partners LP and Enbridge Inc. of Calgary, will compete with TransCanada Corp.'s proposed Keystone XL pipeline, a massive project to move crude from the oil sands of Alberta to U.S. refineries.
• Digital-Privacy Rules Taking Shape. Frustrated by a flood of privacy violations, the Federal Trade Commission on Monday issued a strong call for commercial-data collectors to adopt better privacy practices and called for Congress to pass comprehensive privacy legislation. In a starkly-written 73-page report on privacy in the digital age, the agency called on U.S. commercial data collectors to implement a "Do Not Track" button in Web browsers by the end of the year or to face legislation from Congress forcing the issue.
• Steel Finds Sweet Spot In The Shale. Natural-Gas Boom Begets Low Prices for Fuel, Strong Demand for Piping—a Double Boon for Mills.
• Global Warming Models Are Wrong Again. The observed response of the climate to more CO2 is not in good agreement with predictions.

MarketWatch:

• China Life 2011 Profit Falls 45% On Stock Losses. China Life Insurance Co., the nation's biggest life insurer by premiums, said Monday its 2011 net profit plunged 45% because China's stock market losses battered the company's investment performance. The stock market rout, coupled with slower premium growth, made last year particularly tough for Chinese insurers.
• The Yen's Looming Day Of Reckoning. Japan is on an unsustainable path of a strong yen and deflation. The unprofitability of Japan’s major exporters and emerging trade deficits suggest that the end of this path is in sight. The transition from a strong to weak yen will likely be abrupt, involving a sudden and big devaluation of 30% to 40%. It will be a big shock to Japan’s neighbors and its distant competitors like Germany. The yen’s devaluation in 1996 was a main factor in triggering the Asian Financial Crisis. Japan’s neighbors must have a strong banking system to withstand a bigger devaluation of the yen.
• Australia Shows Signs of Coming Downturn: Dow(DOW) CEO. Dow Chemical Co.'s chief executive said Tuesday that he sees signs of a coming downturn in the Australian economy, arguing that jobs growth and overall competitiveness are in decline. Andrew Liveris was unveiling a plan to resurrect Australia's manufacturing sector at a conference held at the University of Technology in Sydney. "We are seeing troubling signs for our economy at large--maybe even signs of a coming downturn," he said. Liveris said Australia's current growth trajectory is "unsustainable" and that the country had grown far too reliant on China for its prosperity.

Business Insider:

• LAKSHMAN ACHUTHAN: Developed Economies Are Going To Experience Frequent Recessions In The 'Yo-Yo' Years.

Zero Hedge:

• TBTF Get TBTFer: Top 5 Banks Hold 95.7%, Or $221 Trillion, Of Outstanding Derivatives. Every quarter the Office of the Currency Comptroller releases its report on Bank Derivative Activities, and every quarter we find that the Too Big To Fail get Too Bigger To Fail. To wit: in Q4 2011, of the total $230.8 trillion in US outstanding derivatives, the Top 5 banks (JPM, BofA, Morgan Stanley, Goldman and HSBC) accounted for 95.7% of all Derivatives.
• John Corzine - An Insider Helping Out Fellow Insiders.
• Chairman Of Armed Services Subcommittee Asks What Obama Has Offered To Russia As A Bargaining Chip.
• 4 Years Of Japanese Central Planning Failure Charted.
  

CNBC:

• Top Obama Donors Get To The White House. More than 60 of Obama's biggest campaign donors have visited the White House more than once for meetings with top advisers, holiday parties or state dinners, a review by The Associated Press has found.
• Third Round of Bond Buying Not Needed: Fed's Bullard. A third round of Treasurys purchase is not necessary unless the U.S. economy deteriorates further, according to James Bullard, president of St Louis Federal Reserve Bank. "I think QE3 would require the economy to deteriorate somewhat from where it is right now," Bullard said. "The basic story on the U.S. economy is that we've had good news over the last six months or so, especially compared to the recession scenario that was being painted in the August-September time period of last year." Injecting too much liquidity into the system will also have the effect of driving commodity prices higher and reducing real spending power, Bullard said. "I think one of the biggest mistakes is continue to throw us much more in the way of monetary injections into the economy and with that, you get a much higher increase in commodity prices and potentially produce less global consumption across the world, which slows economic activity down," Bullard said. "I'm afraid that's the real danger just now - that we've maintained too loose of a policy right across the global economy and what results is inflation and reduction in real spending power."
• US World Bank Nominee Under Fire Over Book. Jim Yong Kim, the US nominee to head the World Bank, is coming under fire over a book he co-authored that criticises “neoliberalism” and “corporate-led economic growth”, arguing that in many cases they had made the middle classes and the poor in developing countries worse off. Some economists are arguing that Dying for Growth, jointly edited by Dr Kim and published in 2000, puts too great a focus on health policy over broader economic growth. “Dr Kim would be the first World Bank president ever who seems to be anti-growth,” said William Easterly, professor of economics at New York University. “Even the severest of World Bank critics like me think that economic growth is what we want.”

NY Times:

• Support in U.S. for Afghan War Drops Sharply, Poll Finds. After a series of violent episodes and setbacks, support for the war in Afghanistan has dropped sharply among both Republicans and Democrats, according to the latest New York Times/CBS News poll. The survey found that more than two-thirds of those polled — 69 percent — thought that the United States should not be at war in Afghanistan. Just four months ago, 53 percent said that Americans should no longer be fighting in the conflict, more than a decade old. The increased disillusionment was even more pronounced when respondents were asked their impressions of how the war was going. The poll found that 68 percent thought the fighting was going “somewhat badly” or “very badly,” compared with 42 percent who had those impressions in November.

Washington Post:

• Deutsche Bank(DB) No. 1 in Europe as Leverage Hits Market Valuation. Deutsche Bank AG, adding assets as other lenders trim their balance sheets, leapfrogged France’s BNP Paribas SA to reclaim the title of Europe’s largest bank. Assets at the Frankfurt-based company rose 14 percent to 2.16 trillion euros ($2.88 trillion) in 2011, making it the largest publicly traded bank in Europe for the first time in five years, according to data compiled by Bloomberg. Chief Executive Officer Josef Ackermann, who has called proposals to limit bank size “misguided,” will leave behind a balance sheet about 40 percent larger than in 2006, and more than 80 percent as big as Germany’s economy, when he steps down in May. The firm is the second-most leveraged and third-least capitalized of Europe’s 10 largest banks, even after Ackermann boosted reserves and trimmed dependence on borrowed money. “Deutsche Bank has been pretty decidedly opposed to reducing its balance sheet,” said Lutz Roehmeyer, who helps manage about $15 billion at Landesbank Berlin Investment. “It’s understandable: The higher your leverage, the higher the returns when times are good. They want to cut as little as possible to keep doing as much business as possible.”

Reuters:

• Muni Board Inches Toward More Electronic Trading. The board overseeing the $3.7 trillion U.S. municipal bond market on Monday moved closer to allowing more investors to use electronic trading platforms, officially seeking a change in a key regulatory definition. The Municipal Securities Rulemaking Board petitioned the Securities and Exchange Commission to redefine "sophisticated investor," which would help determine the suitability of transactions for some bond buyers. The MSRB, a self-regulatory organization made up of issuers, analysts and bankers, writes the rules that the SEC enforces.
  
• U.S. Gasoline Rises to Record Premium Over Ethanol.

Telegraph:

• Spanish PM Mariano Rajoy's Election Defeat Fuels Bail-Out Fears. The Spanish ruling party’s failure to win control in a key state election is a “serious setback” that casts doubts over the government’s ability to stick to its financial reforms, economists have warned.

Chongqing Daily:

• The China Communist Party's central committee removed Chen Cungen as a standing member of Chongqing city's party committee. Chen Cungen served as the head of Chongqing's People Congress.

Evening Recommendations
Jefferies:

• Rated (MU) Buy, target $11.

Night Trading

• Asian equity indices are +.25% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 147.50 -4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 128.50 -1.0 basis point.
• FTSE-100 futures +.29%.
  
• S&P 500 futures +.01%.
  
• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LEN)/.05
• (MKC)/.53
• (WAG)/.77
• (RBN)/.74
• (PVH)/1.09

Economic Releases
9:00 am EST

• The S&P/CS 20 City MoM% SA for January is estimated to fall -.3% versus a -.5% decline in December.

10:00 am EST

• Consumer Confidence for March is estimated to fall to 70.1 versus 70.8 in February.
• The Richmond Fed Manufacturing Index for March is estimated to fall to 18.0 versus 20.0 in February.
  

Upcoming Splits

• (CPRT) 2-for-1
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Plosser speaking, Italy Bond Auction, 2Y T-Note Auction and the weekly retail sales reports could also impact trading today.
  

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

Stocks Surging into Final Hour on Less Eurozone Debt Angst, Dovish Fed Commentary, Short-Covering, Investor Performance Angst

Broad Market Tone:

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

Equity Investor Angst:

• VIX 14.63 -1.28%
  
• ISE Sentiment Index 200.0 +86.92%
  
• Total Put/Call .99 -4.81%
  
• NYSE Arms .62 -32.71%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 89.93 -1.41%
  
• European Financial Sector CDS Index 204.65 -2.04%
  
• Western Europe Sovereign Debt CDS Index 273.47 -1.57%
  
• Emerging Market CDS Index 236.42 -1.18%
  
• 2-Year Swap Spread 25.0 -1.25 basis points
  
• TED Spread 40.25 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -49.50 +2.5 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .07% unch.
  
• Yield Curve 189.0 +1 basis point
  
• China Import Iron Ore Spot $145.50/Metric Tonne +.21%
  
• Citi US Economic Surprise Index 24.20 -3.2 points
  
• 10-Year TIPS Spread 2.34 -3 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a +47 open in Japan
• DAX Futures: Indicating a +43 open in Germany

Portfolio:

• Higher: On gains in my Tech, Retail, Medical and Biotech sector longs
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is very bullish, as the S&P 500 trades at a multi-year high despite more disappointing US economic data, high energy prices, recent equity gains and rising global growth fears. On the positive side, Networking, Hospital, HMO, Construction, Education and Airline shares are especially strong, rising more than +2.0%. Small-caps are outperforming again. Financial/Tech shares have traded well throughout the day. Copper is rising +2.21%, the UBS-Bloomberg Ag Spot Index is falling -.3% and Lumber is gaining +1.5%. Major European indices rose around +.75% with the exception of Spain, which fell another -.69%. Spain remains one of the world’s worst-performers, falling -4.0% ytd. This remains a large red flag for the region. The Bloomberg European Financial Services/Bank Index is rising +.20%. The France sovereign cds is down -1.87% to 170.51 bps, the Germany sovereign cds is falling -2.3% to 72.13 bps, the Spain sovereign cds is down -1.86% to 423.33 bps, the Italy sovereign cds is down -2.91% to 369.67 bps and the Japan sovereign cds is plunging -10.9% to 93.0 bps. On the negative side, Homebuilding, Coal, Oil Tanker and Oil Service shares are lower-to-flat on the day. Gold is gaining +1.75%. The 10Y Yld is flat at 2.24%, despite today's equity rally. Major Asian indices were mostly lower, led down by a -1.78% decline in India. Despite starting off the year as one of the world’s best-performers, India’s Sensex is now testing its 200-day moving average for the second time in 3 weeks and is down about -6.0% in less than 6 weeks. 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. Moreover, the Citi US Economic Surprise Index has fallen back to mid-Nov. levels. Lumber is -8.4% 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 Home 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 -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +744.0% ytd. 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 surging today on more dovish Bernanke commentary and quarter-end performance chasing. Quite a bit of negative global economic news has been piling up of late, however stocks continue to trade very well. Hedge funds are finally buying into the recent rally, which is likely a major contributor to the strong bid. I would like to see the market prove itself after quarter-end before becoming more aggressive on the long-side. 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 short-covering, more financial/tech sector optimism, less eurozone debt angst, more dovish fed commentary and investor performance angst.

Today's Headlines

Bloomberg:

• Merkel Backs Firewall Increase for First Time Amid Concern Over Spain Debt. Chancellor Angela Merkel gave her first indication that she is prepared to allow an increase in the debt-crisis firewall, saying that Germany could let the temporary and permanent rescue funds run in parallel. Merkel cited “fragility” in Spain and Portugal as she revealed Germany’s position on addressing the future financial backstop. Agreement among euro-area governments this week “could be the basis” for the International Monetary Fund to channel more resources to help fight the turmoil, she said. Germany holds to its stance that the permanent rescue fund should be capped at 500 billion euros ($663 billion), she told reporters in Berlin today. “But in order for us to have the full 500 billion at our disposal, we could imagine that we let the programs that have already been disbursed run in parallel.” Merkel’s comments prepare the ground for Germany to drop its opposition to proposals to expand the 17-nation region’s financial backstop at a meeting of euro-area finance ministers in Copenhagen on March 30.
• EU Ratings Rotation Plan Said to Face Possible Rejection. European Union finance ministers may scrap plans to force companies to rotate the credit-ratings companies they use on concerns that the measure may harm investor confidence and increase market volatility.
• Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt fell, according to BNP Paribas SA. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 6.5 basis points to 591.5 basis points. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.5 basis points to 116.75. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell two basis points to 208 and the subordinated index declined 3.5 to 324.5.
• Hedge Funds Capitulating Buy Most Stocks Since 2010. Hedge funds trailing the Standard & Poor’s 500 (SPX) Index for the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years. A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 48.6 last week from 42 at the end of November 2011, the biggest increase since April 2010, according to data compiled by the International Strategy & Investment Group. The Bloomberg aggregate hedge fund index gained 1.4 percent last month, lagging behind the Standard & Poor’s 500 Index by 2.65 percentage points. Money managers struggling to catch up with the gains have contributed to the rally that pushed the S&P 500 up 27 percent since October as economic reports beat estimates. Market bulls say they are a continuing source of cash that can move stocks higher. Bears say capitulating hedge funds are further evidence that equities have risen too far, too fast as economic growth remains sluggish, warning that the pool of potential buyers is being depleted.
• Bernanke Says Accommodative Policy Needed to Reduce Unemployment. Federal Reserve Chairman Ben S. Bernanke said while he’s encouraged by the unemployment rate’s decline to 8.3 percent, continued accommodative monetary policy will be needed to make further progress. The drop in unemployment may reflect “a reversal of the unusually large layoffs that occurred” in 2008 and 2009, and this process may now be over, Bernanke said in a speech today in Arlington, Virginia. Reducing the jobless rate further will probably require a quicker expansion of business production and consumer demand, which “can be supported by continued accommodative policies,” he said.
• Pending Sales of US Existing Homes Fall in February. The index of pending home purchases fell 0.5 percent to 96.5 after a 2 percent increase the prior month, the National Association of Realtors said today in Washington. January’s reading of 97 was the highest since April 2010. The median forecast of 41 economists surveyed by Bloomberg News called for a 1 percent rise. Three of four regions saw a decrease in pending home sales, today’s report showed. That included a 3 percent decline in the South and a 2.6 percent drop in the West. The Midwest climbed 6.5 percent.
• Goldman(GS) Traders Knopman, Ha Said to Depart for Hedge Funds. Goldman Sachs Group Inc. credit traders Matthew Knopman and Philip Ha are leaving for hedge funds after the fifth-biggest U.S. bank by assets cut jobs and pay last year.
• China to Ban Public Purchases of 'High-End' Alcohol, Cigarettes. Chinese Premier Wen Jiabao pledged to ban the use of public funds to buy cigarettes and “high- end” alcohol, warning that corruption may endanger the ruling Communist Party’s survival. Wen spoke at a State Council meeting yesterday, according to a statement on the government’s Website. He also said state- owned enterprises and agencies must “strictly control” funds used to renovate “luxury” office buildings or buy artwork. “Corruption is the biggest danger facing the ruling party,” Wen said, according to the statement. “If not dealt with properly, the problem may change the nature of, or terminate, the political regime.”

Wall Street Journal:

• Former China Banking Regulatory Commission Chairman Liu Mingkang said yesterday the nation's bank lending may continue its weak trend during the first half.
• Coalition Launched to Work for NY Fracking Ban. Dozens of grassroots environmental groups are joining forces to launch a coordinated campaign to ban natural gas development using high-volume hydraulic fracturing in New York state. The effort launched Monday comes as the state Department of Environmental Conservation works to complete a four-year review of whether shale gas development using the controversial technology known as "fracking" can be done safely under strict regulations. Gov. Andrew Cuomo has said a decision on whether to permit fracking in New York is likely in several months.
• Economics Survey: Fed Should Hold Back From QE3 This Year. The Federal Reserve shouldn’t undertake a new round of bond buying this year, an overwhelming majority of a group polled by the National Association for Business Economics said in a survey released Monday.
• Gold Takes Shine to Bernanke. Gold futures gained as Federal Reserve chief Ben Bernanke signalled support for the central bank's easy-money policies, sending investors looking for alternatives to the U.S. dollar. Such accommodative monetary policy can boost gold's appeal as a currency hedge by raising concerns that the value of paper currencies might take a hit. The most actively traded gold contract, for April delivery, was up $18.70, or 1.1%, at $1,681.10 a troy ounce on the Comex division of the New York Mercantile Exchange. In comments on Monday to the annual conference of the National Association for Business Economics, Mr. Bernanke said further significant improvements in the U.S. unemployment rate will require faster economic growth, "a process that can be supported by continued accommodative policies." The dollar pulled back after the release of Mr. Bernanke's prepared remarks, and gold gained $15 an ounce in the span of about 15 minutes.

CNBC.com:

• Housing Hype: Recovery Turns to Relapse? Housing was charging back. Spring sprung early. Sentiment among home builders doubled in six months. Any talk that the fundamentals might not be supporting the sentiment was met with harsh criticism. And then suddenly it wasn’t.
• Pain at Gasoline Pump Cutting Into Consumer Spending. Drivers are feeling the pinch. Gasoline prices added another 11 cents over the past two weeks, putting the national average price at $3.93 a gallon, according to the Lundberg Survey.

Business Insider:

• George Zimmerman: Trayvon Martin Decked Me And Was Pounding On My Head.
• Make No Mistake... Institutional Investors Are All In. (graphs)
  

Zero Hedge:

• Leveraged ETFs - Why Do We Have Them?
• Dallas Fed Misses Expectations. (graph)
• Quadruple Dip: Housing Relapses As "March Is Turning Out To Be The Weakest Month Since Last October Re: Buyer interest".
• EU Gas Now Over $10: Charting The Global Gas Pump Price Shock.
  

New York Times:

• Anger at Goldman(GS) Still Simmers. In his testimony, Mr. Cohodes said he and his partners at Copper River had even come to wonder if Goldman had in fact borrowed the shares for the firm. Without the shares, Copper River faced losses, while Goldman could have come under regulatory scrutiny.

FINalternatives:

• BofAML Index Rises .14% In March. Hedge funds were up 0.14% as of March 21, according to the Bank of America Merrill Lynch investable composite index, with event driven funds leading the way. Event-driven funds were up 0.57% for the month followed by merger arbitrage funds, up 0.43%. The worst performers were market neutral funds, down 1.19%. According to BofAML analyst Mary Ann Bartels, market neutral funds sold market exposure to neutral from 3% net long and equity long/short funds bought market exposure to 31% from 23% net long.

Engadget:

• Apple's(AAPL) New iPad Gains Chinese Certification, Could Head to Retail Soon.

Rasmussen Reports:

• 57% Favor Use of 'Fracking' to Find More U.S. Oil and Gas. Despite challenges by the Obama administration and environmental groups, most Americans favor use of the so-called “fracking” process to produce more domestic oil and natural gas. A new Rasmussen Reports national telephone survey finds that 57% of American Adults favor the use of hydraulic fracturing to drill for oil and natural gas in shale oil reserves. Just 22% oppose the process, while nearly as many (21%) are unsure about it. (To see survey question wording, click here.)

Reuters:

• German Coalition Strikes Compromise on Solar Cuts - Sources. Leaders of the lower house of parliament in German Chancellor Angela Merkel's centre-right coalition have reached a compromise agreement on cuts in solar power incentives with the upper house after weeks of negotiations, sources told Reuters on Monday.
• India's Sensex Hits 2-Month Low On Foreign Tax Uncertainty. The BSE Sensex fell 1.8 percent to its lowest close in nearly two months, as uncertainty over short-term capital gain taxes for some derivative products sold to foreign investors sparked fears over widespread selling. Brokers warned on Monday certain provisions in the 2012/13 budget announced earlier this month raised the prospect the government could tax so-called participatory notes, or P-Notes, under a provision of the General Anti-Avoidance Rule (GAAR) intended to crack down on tax evasion. P-Notes are derivative products that allow foreign investors to invest into Indian equities via countries such as Mauritius that have tax treaties with India.

Yonhap News Agency:

• South Korea Vows to Intercept Errant North Korean Rocket Booster. South Korean said Monday it will deploy two Aegis destroyers in the west coast to shoot down a North Korean rocket booster if it veers off its planned trajectory. The move came amid escalating international pressure on the communist country to call off next month's rocket launch.

Haaretz.com:

• Poll: Most Jewish Israelis Say Iran Strike Less Risky Than Nuclear Threat.