Qaddafi Hometown Readies for Battle as Obama Defends Move. Libya government troops dug in with tanks to block the advancing rebels at Sirte, Muammar Qaddafi’s hometown, as U.S. President Barack Obama defended his decision to commit U.S. forces in Libya as necessary to avert “a massacre that would have reverberated across the region and stained the conscience of the world.”
Kan Says Japan Nuclear Crisis Unpredictable as Radiation Spreads. Japan’s Prime Minister Naoto Kan said the situation at a radiation-leaking nuclear plant is unpredictable as hazardous conditions hamper efforts to reconnect power needed to cool down the reactors. Radiation levels that can prove fatal were yesterday detected for the first time outside reactor buildings, signaling a partial fuel meltdown. Preventing contaminated water from leaking into the ground or air is key to containing the spread of radiation beyond the Fukushima Dai-Ichi plant. "The situation of the nuclear accident still doesn’t allow us to let down our guard," Kan told an upper house budget committee today. "We’ll continue to work on this with our full attention."
Japan May Scrap Company Tax Cut, Lift Household Levies. Japan’s ruling party is considering abandoning a proposed corporate-tax cut and boosting levies on individuals to help pay for earthquake reconstruction and reduce the need to step up bond sales. Increasing taxes would risk deepening the hit to economic growth in the aftermath of the nation’s record earthquake and ensuing tsunami on March 11. “A tax increase will likely dampen personal consumption when household sentiment has already cooled,” said Norio Miyagawa, senior economist at Mizuho Securities Research and Consulting Co. in Tokyo. He also said that “if the government totally calls off a corporate tax cut, not temporarily abandons it, it could accelerate the risk of the hollowing out of Japan” as manufacturers shift operations abroad.
Halliburton(HAL) Says Middle East to 'Severely' Hurt Results. Halliburton Co. (HAL) said disruptions in the Middle East and North Africa will “severely” affect first- quarter results, reducing earnings in the range of 3 cents to 4 cents a share.
Fed's Rosengren Says Economy Won't Make 'Much of a Dent' in Unemployment. Federal Reserve Bank of Boston President Eric Rosengren said that recent economic growth will not do much to lower the unemployment rate. “While GDP, the growth in the economy, has been positive, it hasn’t been positive enough to make much of a dent on the unemployment rate,” Rosengren said today in a panel discussion hosted by the Boston Globe. “If we only get growth around 3 percent that doesn’t bring the unemployment rate down very quickly,” he said.
Buy Emerging-Market ETF Put Options, Sell Japan's, Barclays Says. Investors should buy put options to sell emerging-market stocks because they may retreat amid rising commodity prices, while selling puts on Japanese stocks, which may rally on earthquake reconstruction, Barclays Plc (BARC) said. Maneesh Deshpande, who leads the top-ranked equity-linked strategies team in Institutional Investor magazine’s 2010 survey, recommended buying January $47 puts on the iShares MSCI Emerging Markets exchange-traded fund and selling January $9 puts on the iShares MSCI Japan ETF.
Government Shutdown Grows Likelier. Talks between congressional leaders and the White House on a deal to fund the government for the rest of the year appear to have slowed, with Democrats and Republicans loudly bickering over the fate of their negotiations. Failure to reach a deal by April 8, a milestone that appears increasingly difficult to achieve, would result in a government shutdown.
Amazon(AMZN) Planning Online Media 'Locker'. Amazon.com Inc. is planning to start a service that would let people store music and video online and access it from various digital devices, people familiar with the matter said.
A Requiem for Detroit. A once-great American city today repels people of talent and ambition.
What if Gadhafi Had Gone Nuclear? The Libya experience highlights the risk of letting dangerous regimes—like Iran's—gain the world's most powerful weapons. America and its allies, empowered by the United Nations and the Arab League, are interceding militarily in Libya. But would that action have been delayed or even precluded if Libyan leader Moammar Gadhafi had access to nuclear weapons? No doubt Gadhafi is asking himself that same question.
MarketWatch:
FDIC's Plan for 'Skin-In-The-Game' Loans.Federal regulators drafting tighter underwriting standards for mortgages are planning to exempt banks from a key rule if they sell loans to two seized mortgage-buying giants. The long-awaited proposal is due to be publicly released by the Federal Deposit Insurance Corp. Tuesday, and the proposal was obtained ahead of that by MarketWatch.
CNBC:
Saudi Arabia Prepares Oil Rig Boost: Report. Saudi Arabia, the world's top oil exporter, has unexpectedly called on top oilfield service companies to help quickly boost the country's oil rig count by 30 percent to expand production capacity, Simmons & Co analyst Bill Herbert said Monday.
Business Insider:
The Muslim Brotherhood Rises In Egypt. In the aftermath of Mubarak's downfall, the Muslim Brotherhood cut their deal with the Egyptian military, leaving the secular forces on the outside looking in. How the Muslim Brotherhood "played" the uprising is the subject of a compelling two-hour "Frontline" documentary, produced in concert with The Global Post. It is worth watching in full.
Barclays(BCS) Says CFTC Should Delay Limits Decision Indefinitely. So while we await the CFTC to issue its decision on position limits, any minute now, we wonder just how many other banks (wink wink Blythe) will follow up with comparable objections demanding an "indefinite" delay to what may soon unleash true price discovery, particularly in the PM market. And incidentally, whatever happened to the Fed's mandated disclosure of the confidential bank rescue information. At what point will Ben Bernanke be held in contempt to court for not following the decision of the Superior Court?
IAEA on Fukushima Plutonium. It appears the plutonium discovered earlier, which according to some Japanese reports was so safe it was borderline edible, may not be all that safe. Per the IAEA:
New York Times:
Goldman Sachs Partners(GS) Sell Shares, and Their Stake Slides. Goldman Sachs’s elite partners have sold $108 million in shares in recent months, driving their total ownership stake in the Wall Street firm down to almost 10 percent, from 11.2 percent. The sales are a small yet significant dilution of the influence the partners have over the firm.
Japan's Electricity Shortage to Last Months. Utility experts and economists say it will take many months, possibly into next year, to get anywhere close to restoring full power.
The 10 Best Cities for Home Buyers. You better believe it -- the real estate market is back. It's time to buy again, and here are the 10 best cities for doing so, according to a new report from Deutsche Bank.
Hot Air:
Washington Post: Why is Obama Pursuing a "Drill, Brazil, Drill" strategy? Good question! In fact, as the Washington Post editorial board notes, it’s actually a series of good questions. Not only does Barack Obama need to explain his enthusiasm for drilling and oil consumption apparently everywhere but in the US, he also needs to explain why the US wants to import oil from Brazil, but not ethanol:
Rasmussen Reports:
69% Still Angry at Government's Current Policies. Likely U.S. Voters remain at least somewhat angry with the current policies of the federal government, up slightly from 65% last August. Just 25% don't share that anger. These findings include 38% who are Very Angry versus only 12% who say they are Not At All Angry.
Politico:
GOP on Obama Libya Speech: Too Little, Too Late. For Republicans on Capitol Hill, the president’s speech on Libya Monday night was too little, too late. Barack Obama’s primetime address – in which he announced that the U.S. military will hand NATO allies enforcement of the no-fly zone and arms embargo in the North African nation – was roundly criticized by GOP moderates and conservatives alike.
USA Today:
Auditor: Financial Overhaul Law Cost $1 Billion Per Year. The financial overhaul law that President Barack Obama and Democrats enacted last year will cost nearly $1 billion to implement this year, according to Congress’ chief auditor.
Reuters:
Ally to File for IPO in Next Two Weeks - Sources.Ally Financial, the auto and mortgage lender majority-owned by the U.S. government, is expected to file paperwork for its initial public offering in the next two weeks, two sources familiar with the situation said on Monday. The IPO will ultimately raise between $6 billion and $7 billion, including common stock and convertible securities, one of the sources said. Citigroup Inc (C.N), Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N) will be listed as the four lead underwriters on the IPO paperwork, that source said.
Fed's Evans: Quake's Effect on Auto Sales "Noticeable". Supply disruptions stemming from the Japanese earthquake will likely have a visible effect on auto sales, Chicago Federal Reserve Bank President Charles Evans said on Monday. "There is going to be an effect on the global supply chain," Evans told reporters at an event at the University of South Carolina.
Telegraph:
Portugal Bailout Pressures Grow as Borrowing Costs Hit Another Record. Portugal felt the pressure to seek a bailout build as its borrowing costs once more hit a euro lifetime record, on the back of downgrades of its banks' credit ratings. The debt-laden nation, which investors believe is merely delaying the inevitable rescue, saw investors' flight from its debt push the yield, or return, on its benchmark 10-year bond to 8.17pc, setting a new high after Friday's climb to 8pc. The rise came as credit rating agency Standard & Poor's downgraded its view of five of the country's banks, having last week slashed its rating of Portugal's sovereign debt after the government's collapsed.
Xinhua:
Egypt's Labor Party Leader Says to Run for Presidency. Egyptian Islamic-oriented Labor Party Secretary-General Magdy Ahmed Hussein announced Monday that he decided to run for Egypt's next president. At a press conference, Hussein said he decided to run for the presidential polls due to unconvincing presidential candidates who have been announced so far. "We're at a critical time... We're facing a duty of taking Egypt out of disastrous state caused by (former president) Hosni Mubarak to its normal status as an honorable nation among other nations," he said. Hussein is a journalist who has been jailed several times by the former regime for publishing and political issues. The views of Egypt's Labor Party are close to those of liberalism in terms of freedom and to those of socialism in terms of social justice.
China Securities Journal:
China may raise interest rates in April or the middle of this year as inflation continues to exceed the government's target, the China Securities Journal said in a front page editorial today. Consumer prices may increase by 6% in June and July. Continued negative real rates for deposits and inflationary pressures may lead China to raise interest rates, according to the editorial.
21st Century Business Herald:
Beijing is preparing more measures to curb property price increases, citing people familiar with the matter.
Evening Recommendations Collins Stewart:
Rated (DNDN) Buy, target $55.
Night Trading
Asian equity indices are -.25% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 111.0 +1.5 basis points.
The S&P/CS 20 City MoM% SA for January is estimated to fall -.44% versus a -.41% decline in December.
10:00 am EST
Consumer Confidence for March is estimated to fall to 65.0 versus a reading of 70.4 in February.
Upcoming Splits
(FTI) 2-for-1
Other Potential Market Movers
The Fed's Bullard speaking, $35 Billion 5-Year Treasury Notes Auction, weekly retail sales reports, JPMorgan Insurance Conference, (CPN) analyst day, (AIZ) investor day, (EPD) analyst meeting and the (IPG) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 94.76 +.02%
European Financial Sector CDS Index 98.25 -.41%
Western Europe Sovereign Debt CDS Index 168.58 bps -.40%
Emerging Market CDS Index 209.54 +.40%
2-Year Swap Spread 20.0 +1 bp
TED Spread 23.0 unch.
Economic Gauges:
3-Month T-Bill Yield .08% unch.
Yield Curve 268.0 -2 bps
China Import Iron Ore Spot $167.40/Metric Tonne +.60%
Citi US Economic Surprise Index +50.30 -3.9 points
10-Year TIPS Spread 2.46% +1 bp
Overseas Futures:
Nikkei Futures: Indicating -78 open in Japan
DAX Futures: Indicating +15 open in Germany
Portfolio:
Slightly Higher: On gains in my Tech and Medical longs
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is slightly bullish as the S&P 500 consolidates recent gains on low volume, despite Mideast unrest, emerging market inflation worries, more hawkish Fed commentary and Japan concerns. On the positive side, Tobacco, HMO, Telecom, Networking, Oil Service and Alt Energy shares are especially strong, rising 1.0%+. (IYR) has traded well throughout the day again. The Transports are trading well for the 3rd consecutive day and are back near their highs for the year. Oil is falling -1.5%, gold is down -.6% and the UBS-Bloomberg Ag Spot Index is falling -1.58%. The Saudi sovereign cds is falling -1.23% to 123.69 bps, the Spain sovereign cds is falling -6.2% to 212.78 bps, the Italy sovereign cds is down -3.6% to 152.75 bps and the Belgium sovereign cds is declining -2.09% to 142.45 bps. On the negative side, Gaming, Oil Tanker and Coal shares are under meaningful pressure, falling more than 1.0%. Copper is falling -1.46%. US price for a gallon of gas is +.02/gallon today to $3.58/gallon. It is up .46/gallon in 41 days. The Portugal sovereign cds is rising +2.74% to 561.55 bps. The bears remain unable to gain any traction again this afternoon despite potential catalysts. Today's overall action appears to me to be a healthy consolidation of recent gains. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower energy prices, less eurozone debt angst and buyout speculation.
U.S. Economy: Consumer Spending Increases More Than Forecast. Americans increased spending more than forecast in February as incomes climbed, easing concern that rising food and fuel costs might derail the consumer demand that makes up 70 percent of the U.S. economy. Purchases increased 0.7 percent, the most since October, after advancing 0.3 percent the prior month, Commerce Department figures showed today in Washington. Another report showed the number of contracts to buy previously owned homes advanced for the first time in three months. More than half the gain in spending last month reflected higher prices, one reason it will be difficult for households to contribute as much to economic growth this quarter as last. An index of pending home sales increased 2.1 percent in February after a 2.8 percent drop the prior month, figures from the National Association of Realtors showed today.
CEOs Tap Record Cash for Payouts as M&A at Post-Lehman High. U.S. executives are starting to spend the record $940 billion in cash they built up after the credit crisis, just in time for annual shareholder meetings. Takeovers topped $257 billion this quarter, the most since the collapse of Lehman Brothers Holdings Inc. in September 2008, according to data compiled by Bloomberg. Standard & Poor’s 500 Index companies authorized 38 percent more buybacks in 2011 than a year earlier and dividends may increase to a record $31.07 a share in 2013, data compiled by Birinyi Associates Inc. and Bloomberg show.
Japan Tax Increase Unavoidable After Quake-Given Debt Load, Lawmakers Say. A tax increase to finance earthquake reconstruction may be unavoidable considering the nation’s huge debt, two Japanese ruling party officials say, and two-thirds of the public agree the measure may be necessary. “We can’t avoid raising taxes as the great earthquake may worsen an already dangerous fiscal situation,” Ikkou Nakatsuka, deputy chairman of the tax committee of the ruling Democratic Party of Japan, said in an interview last week.
Obama Confronts Questions, Skepticism With Address on Libya. President Barack Obama tonight plans to give the American people his justification for intervening in Libya and how it fits in with broader U.S. interests in the region as he faces questions from Congress and skepticism from the public.
Weather-related work disruptions took a heavy toll on U.S. consumer spending and industrial production in the first quarter, according to Citigroup's Steven C. Wieting. The number of full-time employees that only worked part time in one or more months because of bad weather was the highest since 1996, when a January blizzard struck the Northeast. Milder weather across the U.S. in March may bolster employment figures, Wieting said. Citigroup expects non-farm job growth for the month of 250,000, exceeding the 190,000 median estimate in a Bloomberg survey of economists.
EBay(EBAY) Agrees to Buy GSI Commerce(GSIC) for $2.4 Billion to Add Marketing Services. EBay Inc., owner of the largest e- commerce market, agreed to buy GSI Commerce Inc. for about $2.4 billion to add services that help retailers market and distribute their wares. GSI investors will get $29.25 a share in cash, San Jose, California-based EBay said today in a statement. That’s 51 percent more than GSI’s closing price on the Nasdaq Stock Market on March 25.
Shippers Stick With Tokyo as U.S. Says Radiation Easily Cleaned. Five of the six biggest container shippers are maintaining routes to Tokyo and Yokohama after the U.S. Navy said radiation on vessels from the leaking Fukushima Dai-Ichi nuclear plant can be scrubbed off with soap and water.
Protests Flare Up in Restive Syrian City. Syrian security forces fired tear gas on thousands of protesters Monday in a southern city, as President Bashar al-Assad faced down the most serious threat to his family's four decades of authoritarian rule.
Ocean Spill Feared as Toxic Water Rises.A large quantity of highly radioactive water has been discovered outside the No. 2 nuclear reactor at the Fukushima Daiichi nuclear power plant, government officials and the plant's operators said Monday, raising the possibility of the highly toxic water leaking into the ocean just 180 feet away. The water, located in a trench and shaft, has a radioactivity level of 1,000 millisieverts per hour, the same level detected in water soaking the basement of the unit's turbine building.
Nissan Sees Output Recovery Within Weeks.Nissan Motor Co. expects to resume full production "in a matter of weeks, not months" after earthquake damage to auto-parts suppliers sent shockwaves through the global supply chain, a senior executive at the Japanese car maker said. In his first sit-down interview since northeast Japan was rocked by a magnitude 9.0 temblor on March 11, Chief Operating Officer Toshiyuki Shiga sought to play down the impact of supply disruptions that have forced Nissan and others to scale back vehicle production.
Output at Iraq Southern Oil Fields Rising as Oil Deals Kick In. International oil firms that won mega-projects in southern Iraq expect to boost the country's crude oil output capacity by 600,000 barrels a day by the end of the year. "If things go as planned we will be reaching around 2.5 million barrels a day from southern oil fields alone by the end of this year," Dhiaa Jaafar, director-general of Iraq's South Oil Co., told Dow Jones Newswires.
MarketWatch:
Crude Slips as Libyan Rebels Capture Oil Towns.Crude-oil futures fell on Monday, as rebel forces in Libya captured key oil towns over the weekend and investors hoped the antigovernment advance would hasten the end of the conflict. In addition, funds flowed into U.S. equities and out of some commodities, including oil, as stocks advanced. Crude oil for May delivery slipped 77 cents, or 0.8%, to $104.62 a barrel on the New York Mercantile Exchange.
CNBC.com:
US Economy Over the Worst: KPMG Executive Survey. In another sign the American economy is on the comeback trail, a new survey from KPMG shows optimism is improving among U.S. manufacturing and service industry executives. Executives in both key sectors say the worst is behind us.
Fed's Lockhart Plays Down Inflation Worries. The U.S. economy is on track for a sustained recovery but remains sufficiently weak to warrant the help of loose monetary policy, Atlanta Federal Reserve President Dennis Lockhart said on Monday. "I remain satisfied that the current stance of monetary policy is appropriately calibrated to the current and projected state of the economy," Lockhart said in remarks that largely resembled a speech he gave in Florida on Friday.
Why The European Union is Doomed. The structural flaw at the heart of the E.U. dooms it and the euro to either dissolution or radical tranformation.
Deadline Hollywood:
Charlie Sheen's "Winning" Turns to Losing. There's a reason Charlie Sheen is fighting for his day job. Reports from around the country are that his planned "Violent Torpedo Of Truth" tour, featuring a 21-venue live show, still has plenty of tickets available and are by no means sold out as previously claimed. CNBC reports some tickets are on sale for less than face value because they were purchased by secondary sellers who now "are bleeding Tiger Blood on their investment."
Politico:
Facebook Said to Be Courting Robert Gibbs. The former White House press secretary is said to be under consideration for a job at Facebook, where he’d have a senior communications position, The New York Times reported late Sunday.
Rasmussen Reports:
58% Now Favor Healthcare Repeal.58% of Likely U.S. Voters at least somewhat favor repeal of the health care law while 36% are opposed. These figures include 46% who Strongly Favor repeal and 27% who Strongly Oppose it.
Les Echos:
Billionaire investor George Soros wrote that banking supervision should be carried out at the European level rather than being left in the hands of national authorities. That could be done by allowing countries to convert sovereign debt into bonds denominated in euros.
Yomiuri:
The Japanese government is considering the nationalization of Tokyo Electric Power Co., citing multiple government officials.
Kyodo News:
The detection of plutonium at Tokyo Electric Power Co.'s Fukushima Dai-Ichi nuclear plant suggests certain damage to fuel rods, citing Japan's Nuclear and Industrial Safety Agency.
