Weekend Headlines
- President Barack Obama said his administration is readying a plan to unlock credit markets and lower mortgage rates, and vowed that company executives will be stopped from siphoning money intended for economic recovery. “Soon my Treasury secretary, Timothy Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families,” Obama said today in his weekly radio address. He didn’t provide specifics.
- Richmond Federal Reserve Bank President Jeffrey Lacker said the U.S. central bank should avoid favoring specific credit markets such as mortgages and consumer loans and instead boost the money supply with more “neutral” purchases of Treasuries.
- Republican Senator Judd Gregg, the leading candidate to head the Commerce Department in President Barack Obama’s administration, has indicated a Republican would be appointed in his place if he were to leave the chamber, Senate Minority Leader Mitch McConnell said today. “Senator Gregg has told me that if he were to take this appointment, it would not alter the make-up of the Senate in terms of the majority and the minority,” McConnell, a Kentucky Republican, said on CBS’s “Face the Nation” program today.
- Oleg Deripaska, the biggest shareholder of the world’s largest aluminum producer, said he expects “no more happy times” in the industry as a sluggish global economy saps demand. Deripaska, whose stake in United Co. Rusal makes him Russia’s richest man, predicted aluminum will average $1,600 per ton in the next seven years, compared with a current level of $1,349.
- US The average price of hot-rolled steel sheet, the benchmark product used in cars and appliances, dropped to $509 a ton in January from $566 last month, the magazine said today. Cold-rolled sheet slid 9% to $607. Hot-rolled steel prices have fallen by more than half from $1,068 a ton in July as the slowing global economy reduced demand for automobiles, appliances and homes.
- Former Maryland Lieutenant Governor Michael Steele became the Republican National Committee’s first black chairman, a signal the party wants to recast its image after suffering crippling defeats in Congress and losing the White House. Steele also had a message for party conservatives who have been wary of his bid. “We will cede no ground on matters of principle,” he said. By a vote of 91-77, Steele beat South Carolina Party Chairman Katon Dawson on the sixth round of balloting. The party’s current chairman, Mike Duncan, and a second black candidate, former Ohio Secretary of State Ken Blackwell, withdrew from consideration.
- House Financial Services Committee Chairman Barney Frank said President Barack Obama will require banks receiving government aid to lend more to businesses and consumers, saying the Bush administration “made a mistake” by not setting stricter rules for institutions getting funds from the $700 billion financial-rescue package. “I think you’re going to see the Obama administration, having learned from that, push for much more lending,” Frank said today on ABC’s This Week. “There are going to be some real rules in there.”
- U.S. Securities and Exchange Commission Chairman Mary Schapiro made one of her first appointments, hiring Kayla Gillan, an executive at financial analysis firm RiskMetrics Group Inc.(RMG) and former member of the board that oversees U.S. auditors, as a senior adviser, three people familiar with the matter said. Enlisting Gillan, the chief administrative officer at New York-based RiskMetrics, is “a reasurring sign to the investor community, which feels like their concerns haven’t been listened to in the past few years,” said James Cox, a law professor at Duke University in Durham, North Carolina.
- China’s manufacturing contracted for a sixth month in January as the global recession sent growth sliding in Asia’s export-driven economies. The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 42.2 from 41.2 in December, CLSA Asia- Pacific Markets said today in an e-mailed statement. A reading below 50 reflects a contraction. “The fact that the PMI has bottomed is encouraging but should not be taken as evidence of recovery,” said Eric Fishwick, head of economic research at CLSA in Hong Kong. “The rate of contraction remained considerable, reflecting rapidly deteriorating market conditions and fears of a deepening economic downturn.”
- The euro fell to its lowest in almost two months against the US dollar on concern a report tomorrow will show European producer prices slid for a fifth month, giving the region’s central bank more reason to cut interest rates. Europe’s single currency declined for a third day and the British pound weakened the most in 10 days on concern policy makers in the euro area and the U.K. will lower borrowing costs as economic growth stalls.
Wall Street Journal:
- The European Central Bank is drawing up guidelines for European governments that are considering so-called “bad banks” to house banks’ toxic assets. The ECB is also working on guidelines for European governments that plan to guarantee toxic assets remaining on banks’ books, another form of bank bailout. Both sets of guidelines are being drawn up with the European Commission. The ECB hopes the guidelines can help avoid competitive one-upmanship across the 27-nation European Union as nations seek to shore up struggling banks.
- Republican and Democratic senators on Sunday questioned how former Sen. Tom Daschle could make a $128,203 mistake on his taxes but said they were not prepared to oppose his nomination as health secretary. "You have to be troubled by it," said Sen. Jon Kyl of Arizona, the No. 2 Republican in the Senate. Sen. Daschle recently filed amended tax returns to report $128,203 in back taxes and $11,964 in interest. The amended returns reflect additional income for consulting work, the use of a car service and reduced deductions for charitable contributions. The South Dakota Democrat, once the majority leader of the Senate, was scheduled to meet privately Monday with the Senate Finance Committee. Senate Republican leader Mitch McConnell of Kentucky said he was surprised that Daschle had not paid his taxes properly but would not say whether he thought the nomination was in trouble.
- Republican Sen. Judd Gregg of New Hampshire has emerged as President Barack Obama's top choice for commerce secretary, with an announcement coming as soon as Monday, an Obama administration official said Sunday. Democrats and Democrat-friendly independents control 58 seats in the Senate, two short of a filibuster-proof majority. One seat, Minnesota, remains unresolved, but the Democratic candidate appears to be ahead. Sen. Gregg's potential departure could give Democrats a shot at 60 seats, as New Hampshire's governor, who would appoint Sen. Gregg's replacement if he were to become commerce secretary, is a Democrat. But several Republican lawmakers voiced confidence Sunday that a Gregg appointment wouldn't alter the balance of power in the Senate. "Sen. Gregg has assured me that if it were to happen, it would not change the makeup of the Senate," said Senate Minority Leader Mitch McConnell of Kentucky on CBS's "Face the Nation." "It would have no effect on the balance of power in the Senate." Sen. Kyl said the balance-of-power issue has "been thought through," but he declined to say whether a deal had been struck to ensure that New Hampshire Gov. John Lynch would appoint a Republican to finish out the balance of Gregg's term, which is up next year, if Gregg were to become commerce secretary.
- Election officials here turned to the daunting task of counting millions of ballots after Iraqis voted Saturday in provincial elections that saw little violence but less-than-expected turnout. While the election itself went fairly smoothly, observers say it's critical that the polling--and now, the counting of ballots--be perceived as free and fair. A successful election would provide a shot of confidence for the Iraqi government as U.S. forces begin to pull back combat troops from cities at the end of June.
- South Korea
- Some Republican lawmakers criticized the economic-stimulus bill making its way through Congress, while Democrats praised the version passed by the House last week. Senate Minority Leader Mitch McConnell of Kentucky, speaking on CBS's "Face the Nation" Sunday, said: "I can't believe the president isn't embarrassed about the products that have been produced so far." The Senate is expected to vote on its own version of the bill, a package of tax cuts and spending aimed at strengthening the country's ailing economy. The Senate version carries a price tag of nearly $900 billion; the House version costs about $815 billion. Some Republicans suggested the bill include more tax cuts, or that it be broken into two parts, one focused on providing a short-term boost to the economy, and the other on longer-term measures.
- A bill proposed last week to regulate hedge funds in the U.S. could require them to start talking more -- including about their investors. The Hedge Fund Transparency Act was introduced by Sen. Carl Levin, a Michigan Democrat, and Sen. Charles Grassley, an Iowa Republican. One part of the bill that caused a buzz among hedge-fund managers and lawyers over the weekend is a new requirement that hedge-fund investors' names be routinely and publicly disclosed. The broader bill would require hedge funds with at least $50 million in assets to register with the Securities and Exchange Commission. The senators and others are calling for increased public disclosure of hedge funds' assets and trading strategies to help prevent market catastrophes and investor fraud. Currently, hedge-fund registration is voluntary for most of the industry. The proposed legislation calls for hedge funds to provide names and addresses of "each natural person who is a beneficial owner," which lawyers say includes outside investors. It also would require disclosure of a fund's size and the names of its prime brokers, which are the banks that lend funds money and clear their trades. Registration also would open funds to random audits by regulators.
- There is a widespread belief that banks are now refusing to lend as much as they should, and that Congress should pressure them to extend more credit to consumers and businesses. In reality, banks as a whole increased their lending during 2008 -- the notion they haven't is based on a misunderstanding of U.S. credit markets. Pressuring banks to lend more could backfire.
CNBC.com: Discussions between the Obama administration and financial industry representatives continued for a third day Sunday with the focus moving to new terms on lending, transparency and executive compensation for companies receiving financial aid, according to a source familiar with the situation. CNBC.com reported Saturday that the talks were centered around the Obama administration’s consideration of a group of options in providing aid to the financial sector, which include a bad bank concept to buy toxic assets. The announcement of new terms is expected to come this week, the source said, while the announcement of the financial aid plan now appears to be pushed back to the following week. Specifics on the possible terms are still unclear at this point. "Things are fluid," said the source. Saturday's talks appeared to unfold on a dual track.
- A bonus by any other name would smell just as sweet. The fury over the fact that Wall Street paid out $18.4 billion in bonuses in 2008, the "sixth largest" amount in history, is about words and nothing else. This isn't a compensation issue, it's a diction issue. Outside of lower Manhattan, a "bonus" is a special, one-off reward for performance above and beyond what's expected of an employee. And if investment bankers had gotten $18.4 billion worth of bonuses in that traditional sense of the word, then of course it would be truly outrageous. But on Wall Street, and at many law firms as well, a bonus is simply part, often the greater part, of your regular compensation
IBD:
The package, pending approval by the Senate, is seen as a stimulus for health care tech companies such as Quality Systems (QSII), which sells software-based practice management and patient-records systems to doctor and dental practices. Irvine, Calif.-based Quality Systems also sells to federally sponsored health clinics and Indian health services . "We think the best days are ahead, fueled by the Obama plan and by the continued promotion of electronic medical records and paperless health care," said Quality Systems' chief executive Steven Plochocki.
NY Times:
- California Utility Rates Customers on Energy Usage
Politico:
- They acted as surrogates, stumped on the campaign trail and held lavish fundraisers at their homes. They donated heaps of cash, led voting drives and made insanely viral Web videos. And last month, they descended on Washington to celebrate with their publicists, their Prada and — finally — their president. So what do celebrities want from President Barack Obama now? More than they’re likely to get. Although Obama threw a star-studded inaugural festival, he’s no Bill Clinton — so don’t expect Lincoln Bedroom sleepovers for Ted Danson or parties with Barbra Streisand. Indeed, during his inaugural address, Obama spoke dismissively of those who “seek only the pleasures of riches and fame.”
Forbes.com:
- America’s 25 Fastest-Growing Tech Companies
- Tech’s Top Dealmakers
Reuters:
- President Barack Obama may yet win skeptical Republicans in the U.S. Congress over to his economic stimulus plan if he and fellow Democrats abandon some pet projects. Obama would like to signal he is working for all Americans with a show of bipartisan unity when the Senate votes later this month. No Republican backed the plan that passed the House of Representatives last Wednesday. Republicans accuse the Democrats, who control both houses, of loading up on projects known as "pork" that curry favor with constituents but which they say will not stop the slide in the U.S. economy after 13 months of recession. Republicans have blasted the $800 billion to $900 billion package for such programs as $335 million to prevent sexually transmitted diseases and $25 million to rehabilitate trails for all-terrain vehicles. They prefer the money go into more tax cuts.
- Creating "bad banks" may be the only solution to the worst financial crisis in generations, but the quid pro quo of government-led fixes may be more insular lending and a de-globalization of finance. After almost 100 hours of debate, discussion and dinners at this year's Davos World Economic Forum, many politicians, bankers and economists reckon the uncoordinated scramble by states to support national banking systems will now gravitate around "good bank/bad bank" solutions.
- Swiss drugmaker Roche is confident that it will succeed in its bid for U.S. biotechnology group Genentech Inc (DNA), the Swiss drugmaker's chairman was quoted as saying in comments released on Saturday.
- Nike(NKE) is experiencing a sharp increase in online sales, driven in part by cost-conscious shoppers conserving gasoline, the U.S. company's chief executive said on Saturday. "We've seen a fairly dramatic increase in online sales," Mark Parker told a panel at the annual meeting of the World Economic Forum. Industry analysts say the online sector continues to grow as more shoppers opt to shop on the Internet for convenience and the ability to compare bargains. Nike, the world's largest athletic shoe and clothing maker, last month reported a 9 percent rise in quarterly net profit, showing its relatively resilience to the sluggish consumer environment around the world.
- As U.S. President Barack Obama confronts the legacy of a war his predecessor launched almost six years ago, Iraq has once again begun to open its vast oil reserves to foreign companies. The country has launched a bidding round for some of its largest oil and gas fields, which it hopes will attract multibillion dollar investments. There is still some confusion over the deals, scheduled to be awarded by June.
Financial Times:
- The party of Nouri al-Maliki, the Iraqi prime minister, appeared set for a boost as initial tallies from Saturday’s provincial elections indicated voters had bought into its law-and-order campaign. The elections for provincial councils were Iraq’s first since 2005 and passed without serious incident in what was seen as a significant step forward for the nation as it attempts to build on recent security gains that have bolstered Mr Maliki’s credibility. The prime minister did not stand in the elections, but the list led by his Dawa party, the Coalition of the State of Law, used his image prominently during campaigning. Full provisional results were not expected for several days. But the Dawa list appeared to have done particularly well in Basra, Iraq’s second largest city, according to Iraqi media and news agencies.
Telegraph:
- Rio Tinto Group(RTP) may sell an additional stake to Aluminum Corp. of China, its largest shareholder known as Chinalco, and issue a convertible bond to raise $15 billion or more. Chinalco would increase its holding in Rio’s London-listed shares to 18% and buy 14% of the company’s Australian-listed shares under the plan.
- It is all very well for President Obama to vent his anger on all those US bankers who continued to claim billions of dollars in bonuses while expecting Washington to bail them out after the sub-prime mortgage scandal brought the banks to their knees. But conveniently overlooked has been the curious part Mr Obama himself played in the sub-prime debacle.
Frankfurter Allgemeine Sonntagszeitung:
- Germany Al-Qaeda is targeting the country more than the US or UK in a possible attempt to influence Germany ’s engagement in Afghanistan Recent videos by Islamic terror organizations in German indicate the risk of a terror attack has increased, citing Deputy Interior Minister August Hanning.
MailOnline:
- Russia was rocked today by some of its strongest protests yet as thousands rallied across the vast country to attack the Kremlin's response to the global economic crisis. The marches, complete with Soviet-style red flags and banners, pose a challenge to a government which has faced little threat from the fragmented opposition and politically apathetic population during the boom years fuelled by oil.
Globe and Mail:
- The Canadian government expressed optimism Saturday that the U.S. might climb down from a so-called “Buy American” trade policy that several countries have warned could start a trade war. Conciliatory signals from the White House and from American officials at the World Economic Forum in Davos, Switzerland, have fuelled hopes for a resolution. Canada says a range of possible solutions is being discussed – including an exemption for Canadian goods.
Xinhua:
- Housing sales in major Chinese cities like Beijing, Shanghai and Guangzhou failed to rebound during the weeklong Spring Festival holiday, as homebuyers bet on further price cuts following last year's sluggish performance. In Guangzhou, capital of south China's Guangdong Province, home sales from Jan. 25 to 31 fell by 20 percent from last year's lunar New Year holiday, the Guangzhou-based Nangfang Daily reported. "The real estate market was particularly dismal during this year's Spring Festival," Huang Tao, head of Guangzhou's Centaline, a leading real estate agency in China, told Xinhua.
Jakarta Post:
- PT Jakarta International Container Terminal, 51% owned by Hutchinson Port Holdings Ltd., expects the number of containers it handles this year to drop 30% on slowing trade. JICT operates Indonesia
Beijing Youth Daily:
- Beijing
Haaretz.com:
- Benjamin Netanyahu, Israel's leading candidate for prime minister, said Saturday that Iran will not be armed with a nuclear weapon. In an interview with Channel 2 TV, Netanyahu said if elected prime minister his first mission will be to thwart the Iranian nuclear threat. Netanyahu, the current opposition leader and head of the Likud party, called Iran the greatest danger to Israel and to all humanity. When asked if stopping Iran's nuclear ambitions included a military strike, he replied: "It includes everything that is necessary to make this statement come true."
Weekend Recommendations
Barron's:
- Made positive comments on (HIG), (SPG), (VZ) and (BXP).
Night Trading
Asian indices are -1.50% to +.25% on avg.
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/Estimate
- (PJC)/-.81
- (CPO)/.63
- (SYY)/.38
- (HUM)/1.06
- (MAT)/.71
- (ATHR)/.15
- (APC)/.22
- (SNDK)/-.61
- (PCL)/.48
- (AFL)/1.00
- (BEAV)/.46
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Personal Income for December is estimated to fall .4% versus a .2% decline in November.
- Personal Spending for December is estimated to fall .9% versus a .6% decline in November.
- The PCE Core for December is estimated unch. versus unch. in November.
10:00 am EST
- ISM Manufacturing for January is estimated to fall to 32.5 versus 32.9 in December.
- ISM Prices Paid for January is estimated at 18.0 versus 18.0 in December.
- Construction Spending for December is estimated to fall 1.2% versus a .6% decline in November.
Other Potential Market Movers
- The JPMorgan Global High Yield/Leveraged Finance Conference, CSFB Energy Summit, (SRDX) shareholders meeting and (LQDT) shareholders meeting
BOTTOM LINE: Asian indices are mostly lower, weighed down 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 50% net long heading into the week.
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