- Former Bundesbank President Karl Otto Poehl said Germany should resist increasing pressure to rescue other euro-area countries as the financial crisis brings some of them to the brink of default. “A bailout of a debtor country from a surplus country like Germany would be like opening the box of Pandora,” he said yesterday at an event at the London School of Economics. “It’s a very dangerous course that we will enter” and “I’m very much against it, many people in Germany are against it, but the political pressure will increase, it’s obvious.”
- Preliminary 4Q GDP is estimated to decline 5.4% versus a prior estimate of a 3.8% decrease.
- Preliminary 4Q Personal Consumption is estimated to fall 3.7% versus a prior estimate of a 3.5% decline.
- Preliminary 4Q GDP Price Index is estimated to fall .1% versus a -.1% prior estimate.
- Preliminary 4Q Core PCE is estimated to rise .6% versus a prior estimate of a .6% increase.
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- The Chicago Purchasing Manager report for February is estimated to fall to 33.0 versus 33.3 in January.
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- The FinalUniv. of Mich. Consumer Confidence reading for February is estimated to fall to 56.0 versus a prior estimated of 56.2.
Upcoming Splits - None of note
Other Potential Market Movers - The Fed’s Bullard speaking, Fed’s Plosser speaking, Fed’s Yellen speaking, NAPM-Milwaukee, Goldman Tech & Internet Conference, Pacific Crest Technology Summit, (ETN) analyst meeting, (IMGN) analyst meeting, (HS) investor day and (PGN) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology stocks in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs and Biotech longs. I added (QQQQ)/(IWM) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is above average. Investor anxiety is also above average. Today’s overall market action is very bearish. The VIX is falling .09% and is very high at 44.66. The ISE Sentiment Index is about average at 151.0 and the total put/call is low at .66. Finally, the NYSE Arms has been running below average most of the day, hitting .25 at its intraday trough, and is currently 1.0. The Euro Financial Sector Credit Default Swap Index is falling 4.88% today to 143.55 basis points. This index is still below its high of 157.81 on Sept. 16th. The North American Investment Grade Credit Default Swap Index is falling 2.71% to 212.88 basis points. The TED spread is rising .99% to 99 basis points. The TED spread is now down 368 basis points in about four months.The 2-year swap spread is falling 2.92% to 62.25 basis points.The Libor-OIS spread is falling .05% to 100.0 basis points.The 10-year TIPS spread, a good gauge of inflation expectations, is falling 2 basis points to .98%, which is down 173 basis points in about seven months.The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown.The 3-month T-Bill is yielding .27%, which is down 2 basis points today.This morning’s very low put/call and high ISE readings were negative tells.As well, sector breadth was poor, overall breadth was mediocre and there were an unusual number of stocks falling on volume given morning gains.Education, REIT, HMO, Hospital, Biotech, Medical and Oil Tanker shares are under significant pressure today.President Obama’s budget seems to be more damaging to many companies than investors had already anticipated.Asia will likely come under pressure tonight.On the positive side, the AAII % Bulls is still very low at 24.3%, while the % Bears is still very high at 55.14%.Construction, Insurance, Bank, Telecom, Computer Service, Oil Service and Energy Shares are still higher on the day despite the afternoon swoon.Nikkei futures indicate a -52 open in Japan and DAX futures indicate an -62 open in Germany tomorrow. I expect US stocks to trade modestly lower into the close from current levels on rising economic pessimism, more shorting, higher energy prices and tax hike worries.
- Copper may fall to $3,000 a metric ton in the second quarter as an economic recovery is delayed, Standard Chartered Plc said. The metal, used in plumbing and electrical wiring, will average $3,155 a ton in the third quarter, 9.9 percent below a previous forecast of $3,500 a ton, Dan Smith, an analyst at Standard Chartered in London, wrote in a report dated Feb. 24. Copper demand will decline 4 percent in 2009, Standard Chartered estimated, its first forecast for this year, Smith said by phone today.
- US billionaire Wilbur Ross wants to acquire small regional banks weighed down by subprime losses and set up an institution to buy up toxic debt, citing an interview.Ross wants the US government to participate in financing the acquisition of toxic assets and to assume partial responsibility in case of loss. The billionaire will announce a new investment in 60 to 90 days.
Interfax:
- Capital outflows from Russia in January were about $40 billion, citing Finance Minister Alexei Kudrin. Russia’s economy will contract this year even if oil trades at $55 a barrel or higher, citing Kudrin.
Gulf News: - Dubai house rents may fall as much as 50% by the end of this year as the emirate’s real-estate market cools, citing Marwan Bin Ghalita, the head of Dubai’s Real Estate Regulatory Authority. A quarter of current real-estate projects in Dubai may be completed on time, while the rest may be put on hold, rescheduled or merged with other developments, Ghalita said.