Late-Night Headlines
Bloomberg:
- U.S. municipal bonds advanced for an eighth day and sent a benchmark 10-year yield to the lowest since 2003 as debt from the week’s largest new issue gained. State and local government bonds have returned about 5 percent in 2009, outpacing a 3.3 percent decline in U.S. Treasuries and a 0.2 percent gain in corporate debt, Bank of America Merrill Lynch index data show. “That’s an indication that the flight to quality is abating and investors are willing to start assuming some more credit risk,” said Paul Brennan, who oversees about $12 billion in municipal-bond funds at Nuveen Asset Management in Chicago. “Munis have done extremely well year to date.” Municipal funds reported net cash inflows of $758 million during the week through yesterday, AMG said today.
- The cost to protect against defaults by homebuilders including DR Horton(DHI), Lennar Corp.(LEN) and KB Home(KBH) fell after the US Senate voted to include a tax credit for homebuyers in the government’s stimulus plan. Credit-default swaps on Fort Worth, Texas-based DR Horton fell 24 basis points to 358 basis points, the lowest in more than seven months, according to CMA DataVision. Contracts on Miami-based Lennar dropped 15 basis points to 585 basis points, and KB Home of Los Angeles declined 35 basis points to 445, CMA data show. The Senate unanimously approved a Republican amendment yesterday that would temporarily offer homebuyers a tax credit up to $15,000, costing the government $18 billion.
- Australia’s central bank slashed its forecasts for economic growth and inflation and said interest rates at the lowest level in more than four decades will “provide significant stimulus” to offset weaker export demand. Gross domestic product will rise 0.25 percent in the 12 months through June, according to the Reserve Bank of Australia, which in November predicted growth of 1.5 percent for the same period.
- As construction cranes littering Dubai’s skyline go idle, it’s time to revisit that ever intriguing economic indicator: the Skyscraper Curse. As this columnist has pointed out periodically, there’s an uncanny, if unscientific, correlation between financial crises and efforts to build the world’s tallest building. Look no further than Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel. The human propensity for architectural overreach has been a surprisingly reliable omen. It’s not a stretch to think of such projects as visual punctuation marks. A giant billboard made of steel, glass, concrete and money. A common thread between skyscrapers and economic disasters has to be easy credit, which fuels irrational growth, valuations, and hubris.
- Bank of America Corp.(BAC) Chief Executive Officer Kenneth Lewis bought 200,000 shares yesterday, his second purchase in the past three weeks. Four other Bank of America directors bought shares, along with Brian Moynihan, who heads the company’s investment banking and wealth management businesses. The shares rose 6.4% in after-hours trading.
- Hartford Financial Services Group Inc.(HIG), the Connecticut-based seller of life insurance and property coverage, slashed its dividend by 84 percent after reporting a loss and missing a capital target. The insurer slipped $2.89 to $12.20 at 7:09 p.m. in New York.
- The US The fund, which tracks the price of West Texas Intermediate crude, owned about 79,000 March futures as of Feb. 4, according to the fund’s Web site. That’s more than four times the size of its holdings at the beginning of December.
- Baidu’s(BIDU) China Lead Over Google(GOOG) Shrinks After Web Search Outcry. Baidu, the leading Internet search engine in China, has seen its traffic decline and stock price slump since November, when a state-run television broadcast criticized its practice of displaying paid search results higher than some free ones, according to Beijing-based research firm Analysys International. “Until Baidu can clearly demonstrate it has overcome the issues brought up by the negative media reports recently, advertisers will likely pull back spending,” said Steven Chang, chief executive officer at Optimedia China, which buys advertising from Baidu and Mountain View, California-based Google. “Google’s biggest strengths are its ‘Don’t Be Evil’ motto and the integrity of its technology, and the company should attempt to capitalize on them in China.”
Wall Street Journal:
- Senior Senate Democrats pressed Thursday evening to force a final vote on President Barack Obama's economic-recovery package, as a bipartisan group of senators worked to craft a sharply lower-cost alternative to a two-year plan that has been pumped up to more than $920 billion. Twenty moderate senators -- from both parties -- worked Thursday to hammer out a proposal to bring the total package's cost down to about $800 billion, and tilt it more toward tax cuts. Led by Sens. Susan Collins (R., Maine) and Ben Nelson (D., Neb.), the group gathered in an office building across from the U.S. Capitol, combing over the bill for spending programs deemed unlikely to provide immediate benefit to the economy. The group's $800 billion target was set by Sens. Collins and Nelson after meeting Wednesday with Mr. Obama, who insisted the two-year package needed to be at least that large to provide a lift to the sagging economy. Late Thursday, Mr. Obama, on his way to Williamsburg, Va., to visit a House Democratic retreat, suggested he's willing to accept $800 billion.
- The Obama administration's financial-rescue plan is shaping up to include capital injections with tougher terms than the first round and an expansion of an existing Federal Reserve lending facility that could potentially buy up toxic assets clogging the system, according to people familiar with the plans. The discussions are still fluid and much could change. But efforts to create a so-called bad bank to purchase distressed assets and to insure other assets against future losses appear less central to the administration's thinking. Still, some within the administration continue to push those efforts and they could wind up as part of the plan that will be detailed Monday by Treasury Secretary Timothy Geithner.
Leon Panetta, nominee to be director of the Central Intelligence Agency, said Thursday that he would "turn the page to a new chapter" at an institution that, according to current and former officials, faces a host of internal challenges. President Barack Obama is pushing what he calls a "rebranding" of U.S. intelligence and moved quickly after his inauguration to close the CIA's secret prisons and revoke controversial interrogation techniques. Mr. Panetta, formerly a chief of staff under President Bill Clinton, said at Thursday's hearing that he believes waterboarding, or simulated drowning, constitutes torture and is wrong. But he said government employees who carried out waterboarding on the belief that it was legal based on opinions supplied by government lawyers shouldn't be prosecuted. Just before the hearing began, Mr. Panetta's responses to the committee on his ties to EduCap Inc., a nonprofit student lender, were released. Mr. Panetta said he flew "on one or two occasions" on the airplane of EduCap founder Catherine B. Reynolds, who is under investigation by the Senate Finance Committee and the Internal Revenue Service for possible improper use of EduCap's $28 million corporate jet. Mr. Panetta said the flight was for a business meeting and didn't represent taxable income.
- The senators behind a week-old bill that urges stricter oversight of hedge and private-equity funds said Thursday they never meant to propose that fund investors' names be publicly disclosed. Securities lawyers and investment-fund attorneys say that, as it's written, the bill's use of "beneficial owners" would include limited partners, which encompasses outside clients who put money in the funds. Fund-industry lobbyists are strongly opposed to such disclosure.
- Countries grappling with global recession have enacted a wave of barriers to world commerce since early last month, scrambling to safeguard their key industries -- often by damaging those of their neighbors. The World Trade Organization is gathering nations in a special meeting Monday to try to stem the rising tide, just two weeks after saying protectionism was largely under control. On Thursday, 10 European Union commissioners headed to Moscow for talks Friday with Prime Minister Vladimir Putin and other Russian officials, where they plan to air complaints over the pace of new Russian trade barriers.
- President Barack Obama's crackdown on Wall Street pay contains loopholes, and may have limited impact in restraining compensation, according to some executive-pay consultants and management attorneys. Some compensation professionals already are pointing out potential holes in the rules, including tactics such as changing executives' titles or rearranging pay packages. Just as past attempts by the government to restrict executive pay largely backfired, these people warn, the new curbs also may have unintended consequences.
NY Times:
- China’s Unemployment Swells as Exports Falter. Hundreds of thousands of migrant workers are returning here earlier than usual from their home villages after the Chinese New Year holiday. Lugging their belongings in plastic sacks and cardboard boxes, they are hoping to find increasingly scarce jobs. Many will fail. A spokeswoman for the Guangdong Provincial Labor and Social Security Bureau said Thursday that 3 million of an expected 9.7 million migrant workers had returned to the province by Wednesday evening. Many have jobs waiting for them, but two million have no employment lined up and must look for work, she said. Beijing authorities disclosed Monday that based on an agriculture ministry survey of villages just before the Chinese New Year holiday last week, about 20 million of the nation’s 130 million migrant workers are unemployed.
BusinessWeek:
- When Google (GOOG) and its partners first unveiled plans for the Android operating system, they billed it as software that would run mobile phones. That mission was accomplished the following year with the late 2008 release of T-Mobile's G1 phone. More Android-enabled handsets are on the way. But before long, you may be seeing Android in a lot of other electronic devices.
- Small Banks Say ‘No Thanks’ to US Bailout Money. Healthy small bankers would like the boost to lend more, but fear regulations and conditions attached to the Treasury Dept.’s rescue program.
USA Today.com:
- A plan by Republicans in the Senate aimed at pushing mortgage rates lower has gone down to defeat at the hands of Democrats. The plan by Nevada Republican John Ensign would have encouraged banks to issue mortgages with interest rates of 45 to 4.5%. The government-controlled mortgage giants Fannie Mae and Freddie Mac would have bought the mortgages on the secondary market. Jumbo loans would have been ineligible. Democrats killed the idea Thursday night by a 62-35 vote. The plan also contained an assortment of tax cuts such as cutting the bottom 10% income tax rate in half for two years.
- President Obama ordered the Department of Energy on Thursday to set tough new energy-efficiency standards for a broad range of home appliances, from dishwashers and ovens to lamps and air conditioners. That's a sharp break from Bush administration policy. It's also the latest sign Obama plans to move aggressively to reduce greenhouse gas emissions. He's already pushed to double renewable energy in five years and boost fuel efficiency in vehicles. Although final rules have yet to be issued, Obama indicated Thursday that appliance standards would be dramatically tightened.
AP:
- In a move aimed at limiting harm to Arctic waters opened by global warming, a federal advisory board voted Thursday to ban commercial fishing north of the Bering Strait off Alaska Seattle , voted unanimously to prohibit industrial fishing in nearly 200,000 square miles of U.S. Alaska pollock, the largest U.S.
Reuters:
- Russia plans to start up a nuclear reactor at Iran's Bushehr plant by the end of the year, the head of Russia's state nuclear corporation said on Thursday. "If there are no unforeseen events...then the launch will go according to the timetable," Rosatom chief Sergei Kiriyenko told reporters in the Kremlin.
- Did middleman know about Madoff losses beforehand?
Financial Times:
The head of Germany’s biggest bank on Thursday laid out the welcome mat to disgruntled American banking executives, suggesting that Barack Obama’s tough curbs on boardroom pay could encourage the best to defect to overseas rivals. Josef Ackermann, chief executive of Deutsche Bank(DB) , predicted that the president’s proposed $500,000 (€390,000) cap on executive pay at US banks that accept large tranches of state aid could help it recruit their most talented people. “If you are only going to be able to pay a $500,000 bonus, I think talent will be happy to work for us. At the end of the day, this is a people business, about who has the best talent,” he said. Mr Ackermann, who is to step down next year, said Deutsche would emerge successfully from the crisis after cutting some of its riskiest businesses. “We are convinced trust will return to the markets ... banks profiting from this will be the few independent investment banks that have handled the crisis without external assistance and have positioned themselves sustainably.
- US officials are examining ways gradually to convert government stakes in banks into ordinary shares as banks accumulate losses, according to people close to the discussions. The point would be to provide a drip-feed of additional common equity as needed to cover losses – without the government owning a larger stake in the banks than is necessary. Treasury Secretary Tim Geithner will announce the financial sector rescue plan on Monday along with a set of policies designed to reduce foreclosures and boost the housing market. Bank stocks, meanwhile, rallied on Thursday as bankers expressed fresh confidence that the US authorities will find ways to circumvent mark-to-market rules as part of the new financial rescue package. Executives who have talked to government officials recently said one option for the government would be to buy toxic assets below the value at which banks value them on their balance sheets, but provide a government security equal to the difference between government’s purchase price and the marked value. That would enable banks not to crystallize their losses on the assets for a number of years and wait and see whether they recover in value. Executives and policymakers who have spoken to key officials believe the plan to be presented by Mr Geithner will have insurance-style guarantees on bank portfolios of assets at its core, but will include a so-called “bad bank” that will acquire securities that have already been heavily written down.
cbcnews:
- Alberta May Offer Incentives to Spur Oil Drilling
South China Morning Post:
- Climate change will become a new focal point in bilateral dialogue between China and the United States, an official in the administration of US President Barack Obama said.
China Business News:
- Shanghai There were 8.4 million square meters(90 million square feet) of completed new apartments ready for sale at the end of January, close to total new home sales in the city in 2008, citing local government statistics. This “huge” inventory, which will take about 10 months for the local market to absorb, puts pressure on prices in districts such as Jing’an.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (RATE), target $41.
- We are raising our 4Q08 EPS estimates for (ARO), (GPS), (LTD), (ROST) & (TJX) and lowering our 4Q08 EPS estimate for (CHS), (PLCE) and (URBN).
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
- (BIIB)/.92
- (WY)/-.57
- (LPNT)/.64
- (HI)/.43
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for January is estimated at -540K versus -524K in December.
- The Unemployment Rate for January is estimated at 7.5% versus 7.2% in December.
- Average Hourly Earnings for January are estimated to rise .2% versus a .3% gain in December.
3:00 pm EST
- Consumer Credit for December is estimated at -$3.5B versus -$7.9B in November.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are higher, boosted by technology and financial stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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