Late-Night Headlines
Bloomberg:
- The Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up as it tries to break the back of the credit crisis, two people familiar with the matter said. FDIC Chairman Sheila Bair is pushing to run the operation, which would buy the toxic assets clogging banks’ balance sheets, one of the people said. Bair is arguing that her agency has expertise and could help finance the effort by issuing bonds guaranteed by the FDIC, a second person said. President Barack Obama’s team may announce the outlines of its financial-rescue plan as early as next week, an administration official said.
- OPEC wants U.S. regulators to curtail oil trading by hedge funds and speculators who helped make last year the most volatile in crude oil trading. Abdalla el-Badri, secretary-general of the Organization of Petroleum Exporting Countries, is seeking rules to “limit the level of speculation” by investors who buy oil without planning to use it. Oil surged 46 percent in the first half of 2008 to a record $147.27 only to plunge by the end of the year, prompting OPEC to make its biggest ever supply cuts. “The move above $90 a barrel was driven by financial flows rather than fundamentals” of supply and demand, said Edward Morse, chief economist at Louis Capital Markets in New York. Selling by speculators “helped propel the commodities price downturn, but fundamentals have weighed heavily as well.” President Barack Obama has yet to comment on the need to rein in commodity traders. Interest from speculators has rebounded, with the number of barrels owned by active speculators, index funds and other investors only 13 percent lower than when it was when oil prices peaked in July, Goldman Sachs Group Inc. analyst Jeffrey Currie in London said in a report yesterday. World consumption will fall for a second year in 2009, the first back-to-back contraction in 25 years, according to the Paris-based International Energy Agency.
- The cost of protecting corporate bonds from default fell in Australia after Rio Tinto Group said it may sell shares to cut debt. Japan’s benchmark of credit- default swaps was unchanged in Tokyo.
- General Electric Co.(GE) and its finance arm may lose their top-level Aaa ratings as the global recession and credit crisis lessen the chance GE Capital can make a $5 billion profit goal this year, Moody’s Investors Service said. The potential downgrade affects long-term debt that isn’t insured by the Federal Deposit Insurance Corp., Moody’s analysts said in a statement today. The Markit iTraxx Australia index declined 5 basis points to 320 as of 11:45 a.m. in Sydney, ABN Amro Holding NV data show. The Markit iTraxx Japan index was unchanged at 325 basis points, Barclays Capital prices show.
- The U.S. House approved a measure to make it easier for U.S. workers to win pay-discrimination lawsuits, sending the legislation to President Barack Obama for his signature. The legislation would let employees sue on a claim they are being underpaid because of discrimination that occurred years earlier. The House vote was 250-177. The Senate passed the bill last week.
- Senator John Kerry, the chairman of the Foreign Relations Committee, said he will “do everything in my power” to pass climate-protection legislation this year. Former Vice President Al Gore is scheduled to testify to Kerry’s panel tomorrow on the environmental threat from greenhouse-gas emissions.
- When Wen Jiabao and Vladimir Putin were invited to speak to the World Economic Forum, China and Russia were supposed to be saviors of the global economy as the U.S. fell into recession. No more. Today, as the Chinese premier and Russian prime minister address the opening of the annual meeting in Davos, Switzerland, they’re disappointing those who bet their economies would help power the world through the slump and weakening their case for a greater say among global leaders. “The Chinese and Russians are no longer as cocky as they were about six months ago,” said Huang Jing, a political science professor at Singapore’s Lee Kuan Yew School of Public Policy. “They became prosperous because they were integrated into the international economic system, and now they realize there’s a price they have to pay.”
- Australian consumer prices declined by the most in 11 years last quarter, increasing scope for the central bank to cut interest rates as evidence mounts the economy is heading for its first recession since 1991.
Wall Street Journal:
- The U.S. economic stimulus package neared $900 billion in the Senate, as President Barack Obama wooed Republicans ahead of an expected House vote Wednesday. The rare trip by a president to Capitol Hill revealed the urgency in Congress and the White House over a cure for the souring economy. The day was marked by Democratic deal-making to win support from skeptical Republicans. The Obama administration indicated it would agree to a $69 billion Senate proposal to shield tens of millions of middle-income Americans from the so-called alternative minimum tax, a priority of Iowa Sen. Charles Grassley, the top-ranking Republican on the Senate Finance Committee. White House officials also spread the word that Mr. Obama was willing to drop a proposed expansion of contraceptive coverage under Medicaid that has become a symbol for Republican critics.
- Interior Secretary Ken Salazar indicated Tuesday that the Obama administration could be open to expanded offshore drilling and is considering doing away with a controversial program that allows oil companies to pay in kind for oil and natural gas taken from public lands. Environmental groups want the Obama administration to re-impose a ban on expanded offshore drilling that President George W. Bush lifted last year. The Bush administration plan would open tracts off the Atlantic and Pacific coasts where drilling had been prohibited.
- A measure to allow judges to reduce the principal amounts of mortgages for troubled borrowers in bankruptcy cleared a key hurdle Tuesday when it was approved by a U.S. House panel. The legislation, which is progressing quickly in Congress, would amount to the most aggressive step yet by the federal government to help strapped borrowers avoid foreclosure.
- While embattled Illinois Gov. Rod Blagojevich continued his whirlwind media tour in New York on Tuesday, state senators in his impeachment trial listened to a few of the conversations intercepted by federal agents that were used to bring conspiracy charges against him. Proponents contend it will act like a stick, spurring mortgage servicers to complete more loan modifications. Meanwhile, the banking industry warns that it will raise mortgage costs for all borrowers.
- The fence along the U.S.-Mexico border is mostly finished. Customs and Border Protection spokesman Lloyd Easterling says that 601 miles of the project had been completed as of a week ago. Mr. Easterling said 69 miles of the fence still must be built to meet the goal set during the Bush administration. In December, then President-elect Barack Obama said he wanted to evaluate border security operations before he considers whether to finish building the fence under his administration. Mr. Easterling said the Obama White House has not told Homeland Security to stop building the fence.
NY Times:
- As the commercial real estate market limps along in the midst of a global recession, some investors say they believe that at least one sector — medical office buildings — might serve as a crutch, as it has in past economic downturns.
- The economic stimulus plan that Congress has scheduled for a vote on Wednesday would shower the nation’s school districts, child care centers and university campuses with $150 billion in new federal spending, a vast two-year investment that would more than double the Department of Education’s current budget. The proposed emergency expenditures on nearly every realm of education, including school renovation, special education, Head Start and grants to needy college students, would amount to the largest increase in federal aid since Washington began to spend significantly on education after World War II. Critics and supporters alike said that by its sheer scope, the measure could profoundly change the federal government’s role in education, which has traditionally been the responsibility of state and local government.
BusinessWeek:
- Like oil? Need oil? If so, Jose S. Gabrielli de Azevedo, the president and CEO of Brazil's state-controlled oil company, Petrobras (PBR), may be your next melhor amigo (best friend). At a time when other big oil companies are barely managing to keep their production from declining, Petrobras on Jan. 23 announced an ambitious $174 billion plan to develop new oil and natural gas fields, mostly in deep waters off Brazil's coast. This investment—undertaken in spite of a global economic downturn that makes it hard to raise money—will help offset the shortfall in production from other oil fields around the world and restrain the likely increase in oil prices after the recession ends.
- Barack Obama made sophisticated use of technology during his run for the White House. And throughout his campaign, the BlackBerry (RIMM)-addicted candidate stressed the transformative power of technology, making a high-profile promise to provide high-speed Internet access to all Americans. But when the House unveiled a preliminary version of the economic stimulus plan, crafted with some input from President Obama's advisers, the amount of money allocated for broadband Internet development was much lower than experts had anticipated. In the $825 billion proposal, only $6 billion was aimed at broadband, far short of the $12 billion to $30 billion that industry experts estimate it would cost to wire the nation. The House bill allocated the same amount of money to weatherizing the homes of low- and moderate-income people.
CNNMoney.com: Citigroup CEO Vikram Pandit downplayed the notion that his bank, or any other major financial institution for that matter, would be taken over the by the U.S. government.
Forbes:
- Mobile TV Turns On
IBD:
- Athenahealth (ATHN), the company Jonathan Bush co-founded in 1997 and currently leads, offers technology and services to help doctors manage billing and medical records. President Obama has emphasized this kind of medical IT to help save money in health care while expanding coverage.
Philly.com:
- Joseph S. Forte, who in September told investors he had grown their money to $154 million, but now stands accused of running a Ponzi scheme, appeared alone in federal court today because he has no money for a lawyer. "I'm trying to raise the money," Forte told Magistrate Judge Faith Angell. She granted him a one-week continuance, pushing the preliminary hearing back to Monday.
AP:
- Former President Bill Clinton earned nearly $6 million in speaking fees last year, almost all of it from foreign companies, according to financial documents filed by his wife, Secretary of State Hillary Rodham Clinton. The documents obtained Tuesday by The Associated Press show that $4.6 million of the former president's reported $5.7 million in 2008 honoraria came from foreign sources, including Kuwait's national bank, other firms and groups in Canada, Germany, India, Malaysia, Mexico and Portugal and a Hong Kong-based company that spent $100,000 on federal lobbying last year.
Financial Times: Capital flows to emerging markets are in danger of collapsing this year as the financial crisis in advanced economies risks choking off the supply of credit to the developing world, an association of large banks warned on Tuesday. The IIF estimates emerging market institutions will need to refinance about $20bn a month in the first half of 2009, but that the current supply of credit covers only half that.
TimesOnline: Hedge fund four helpfully stick their heads in the noose.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (CHRW), target $60.
- Reiterated Buy on (FORM), target $24.
- Reiterated Buy on (HSY), target $42.
- Reiterated Buy on (VZ), target $35.
- Reiterated Buy on (JAVA), target $6.70.
Night Trading
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Before the Bell CNBC Video Global Commentary WSJ Intl Markets Performance Commodity Movers Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Daily Stock Events Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- (PX)/.96
- (BHI)/1.26
- (WLP)/1.36
- (LM)/-.4.00
- (SO)/.25
- (BA)/.77
- (T)/.65
- (WFC)/.33
- (COP)/1.24
- (CVD)/.70
- (RHI)/.25
- (QCOM)/.47
- (ARG)/.75
- (ALL)/1.35
- (SYMC)/.32
- (RYL)/-1.18
- (SBUX)/.17
- (WDC)/.31
- (BSX)/.13
- (OI)/.39
- (DNB)/1.82
- (BXP)/1.35
- (CTXS)/.47
- (SY)/.61
- (HES)/.37
- (BDX)/1.15
- (SWK)/.59
- (MUR )/.79
- (GD)/1.59
- (PCU)/.21
- (LRCX)/-.04
- (AMG)/1.20
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,800,000 barrels versus a +6,100,000 barrel increase the prior week. Gasoline supplies are estimated to rise by +1,750,000 barrels versus a +6,475,000 barrel increase the prior week. Distillate inventories are expected to fall by -1,125,000 barrels versus a +790,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to fall by -.50% versus a -1.98% decline the prior week.
2:15 pm EST
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology stocks in the region. I expect US equities to open modestly higher and to rally into the afternoon, finishing higher. The Portfolio is 100% net long heading into the day.
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