Late-Night Headlines
Bloomberg:
- Visa Inc.(V), the world’s largest electronic payments network, said profit rose 35 percent as more consumers outside the U.S. used credit and debit cards. Visa rose 7.9 percent to $53 in New York trading at 5:18 p.m. after the company affirmed previous profit targets.
- Cisco Systems Inc.(CSCO), the largest maker of networking equipment, expects sales to fall as much as 20 percent this quarter, more than analysts projected, as orders deteriorate. The shares lost 2.7 percent in late trading.
- OPEC oil supply cuts may not be enough to counter falling industrial demand, requiring reductions by non-OPEC producers to restore balance to the market, Goldman Sachs Group Inc. said today. January output must be curtailed by another 1.1 million barrels a day to reduce a surplus, commodity analysts Giovanni Serio and Jeffrey Currie said in a report. About 600,000 barrels a day will probably have to come from non-OPEC producers, with another 500,000 from the Organization of Petroleum Exporting Countries. “Prices will have to remain under pressure in the near term to force non-OPEC producers to cut supply,” they said.
- The International Energy Agency, an energy policy adviser to 28 nations, is likely to reduce its 2009 oil demand forecast again, following changes to International Monetary Fund economic predictions, Newedge USA LLC said. In its January report, the Paris-based IEA forecast world consumption will fall by 510,000 barrels a day in 2009 to 85.3 million barrels a day, revising December’s prediction of a 400,000 barrel-a-day increase. High oil prices earlier last year, coupled with a slowing world economy, have led consumers to use less fuel, such as gasoline and fuel oil. The 0.6 percent reduction currently predicted by the IEA would be the first back-to-back contraction in oil demand since 1983. Demand fell 0.3 percent in 2008, according to the IEA. Newedge analysts Halff and Veronique Lashinski said in their report, dated Feb. 3, that global oil demand “could contract by as much as 1.3 million barrels a day this year, versus our earlier forecast of a 600,000 barrel a day contraction.”
- Corn prices fell to a seven-week low, extending the longest slump since October, on speculation that the U.S. recession is slowing demand for grain used to make ethanol and feed livestock.
- Former U.S. Vice President Al Gore and his Alliance for Climate Protection say clean-coal technology is a fantasy. Peabody Energy Corp., the biggest U.S. coal producer, says another prominent Democrat has pledged to make the technology a reality: President Barack Obama. The Gore-Obama split illustrates a growing debate in the U.S. as the new president attempts to deliver on his promise to reduce carbon dioxide emissions in the country 80 percent by 2050. Depending on who’s speaking, coal is either the villain or part of the solution.
- New Jersey Governor Jon Corzine has fallen behind Republican challenger Christopher Christie in his quest for a second term, according to a Quinnipiac University poll released today. Christie, 46, a former U.S. attorney, leads Corzine 44 percent to 38 percent, reversing a 42 percent to 36 percent lead for the Democrat in a Nov. 19 Quinnipiac poll. Half of New Jersey voters surveyed disapprove of Corzine’s performance.
- Speculative trading in commodity markets has affected prices, President Barack Obama’s nominee to head the Commodity Futures Trading Commission told Congress, departing from the views of the agency’s prior chief. The effect of trading by speculators, who don’t produce or take actual delivery of a commodity, has been “demonstrated in the commodity futures markets during the past several years,” Gary Gensler said in a Jan. 26 letter to Senator Carl Levin, a Michigan Democrat. The letter was posted online today by Levin’s staff. Crude oil futures prices rose to a record $147.27 a barrel in July, prompting calls from Congress for limits on speculative trading. Participants in such trading include groups investing in the market through index funds, such as pension funds and endowments. The growth in commodity index funds was “a contributing factor” to the surge in commodity prices in the middle of last year, Gensler wrote. “The expanding number of hedge funds and other investors who were increasing asset allocations to commodities within their portfolios also put upward pressure on prices,” he states in the letter. Gensler said the CFTC’s “core functions” are to guard against excessive speculation and market manipulation.
- Congressional leaders, trying to quell a dispute over “Buy American” provisions in the stimulus package, are crafting a version that would apply only when they don’t violate trade rules, according to industry officials and a congressional aide.
- House Republicans formed a health team to counter the Democratic majority’s plans to expand government- run U.S. health-care programs. The task force, headed by Representative Roy Blunt of Missouri, will offer proposals that avoid creating a new “government-dominated health care bureaucracy,” House Republican leader John Boehner, of Ohio, said today in an e- mailed statement. “Republicans are committed to making health care more affordable, more accessible and offer more options to American families,” Blunt said in the statement. “Unfortunately, the only options we’ve seen so far from this Congress would push us to a one-size-fits-all government-run system.”
- Russia’s central bank is exacerbating the ruble’s 34 percent plunge since August, even as it struggles to defend the exchange rate, by providing loans to banks that speculate on the currency, say Alfa Bank and UniCredit SpA. Bank Rossii lent 7.7 trillion rubles ($214 billion) in overnight and seven-day loans secured with bonds or other collateral in the 16 trading days last month, about double the 4.8 trillion rubles provided in so-called repurchase auctions in December, central bank data show. Banks used “almost all” the money to bet against the ruble, said Natalia Orlova, chief economist at Alfa, Russia’s largest non-government bank. The ruble fell 18 percent against the dollar in January.
- The euro traded near a two-month low against the US dollar on speculation the economic slump in Eastern Europe will cause the 16-nation region’s recession to deepen. The currency may weaken for a second day versus the yen as traders added to bets the European Central Bank will cut interest rates further this year to spur growth, after probably leaving them unchanged at a meeting today. “Given growing concerns about turmoil in emerging markets such as Kazakhstan and Russia, the euro is a sell,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader.
Wall Street Journal:
- Republicans are exercising increasing influence over President Barack Obama's economic-stimulus plan in the Senate, with Maine Sen. Susan Collins emerging as a leader of efforts to trim the initiative and sharpen its focus on job creation. Sen. Collins, a centrist with allies in both parties, was called to the White House Wednesday to meet with Mr. Obama. She envisions holding the cost of the stimulus package to $700 billion or less, well below the $819 billion package of tax cuts and spending the House approved last week. The effort amounts to "rebuilding" the Obama package, according to an individual familiar with the talks. The package would include tax cuts and investments intended to create jobs, such as infrastructure projects, but it would step back from spending projects that don't immediately lift the sagging U.S. economy. After meeting with Mr. Obama, Sen. Collins expressed concern about a number of spending provisions, including $780 million for pandemic-flu preparedness. "I have no doubt that the president is willing to negotiate in good faith, that he wants to have a bipartisan bill," Sen. Collins said.
- The White House's nominee for Director of the Central Intelligence Agency, Leon Panetta, has earned more than $700,000 in speaking and consulting fees since the beginning of 2008, with some of the payments coming from troubled financial firms and from a firm that invests in contractors for federal national security agencies, according to financial disclosures released Wednesday.
CNBC.com: Oil is relatively cheap, supplies are more than ample (some analysts fear we're awash in crude), so why am I paying more at the gas pump than I was a month ago? Today the national average for regular unleaded gasoline hit $1.90 a gallon, the highest price we've seen since last November. Retail gasoline prices have risen more than 30 cents since the beginning of the year, up nearly 14 percent, while oil prices have fallen about 13 percent in that same time period. Due to the decline in demand, refiners have already planned to scale back operations during this traditional "turnaround" season a bit earlier and extend maintenance operations a bit longer. Many analysts, including Stephen Schork of the well-regarded industry newsletter The Schork Report, point to the refiners lack of production, particularly on the East Coast, as a major reason for the rally we've seen in gasoline futures over the past couple of days.
IBD:
- In the face of ugly markets, Edwards Lifesciences (EW) has been showing that investors still like innovation. Since December, its shares have risen 22% to 55, from a 12-month low of 45.
Washington Post:
- The Obama administration has told the Pentagon to pare its next budget request to the level it projected a year ago, down nearly $60 billion from a more recent Pentagon wish list, the White House budget office said on Wednesday. In doing so, the administration would be capping the fiscal 2010 Defense Department base budget at about $527 billion, excluding war costs in Iraq and Afghanistan, said Tom Gavin, a spokesman for the White House Office of Management and Budget. Douglas Harned, a defense industry analyst at Sanford C. Bernstein & Co., said on Wednesday that he continued to expect the 2010 "baseline" investment account to rise at least 2 percent to 3 percent from 2009. "This 'worst case' scenario would still be an attractive budget outlook for defense stocks," he wrote in a note to clients. Congress "will almost certainly want to add items that would raise the budget further," Harned wrote, referring to programs such as Lockheed's F-22 fighter jet and Boeing's C-17 military cargo aircraft. The Pentagon's top suppliers include Lockheed Martin Corp, Boeing Co, Northrop Grumman Corp, General Dynamics Corp, Raytheon Co, BAE Systems, L-3 Communications Holdings Inc and United Technologies Corp.
MSNBC.com:
- In its first action to overturn Bush administration policies on energy, the Obama administration on Wednesday said it will cancel oil drilling leases on more than 130,000 acres near two national parks and other protected areas in Utah. “This action will come as a disappointment to communities that were counting on these energy leases to generate high-wage jobs in these difficult economic times," Rep. Doc Hastings, R-Wash., said in a statement. "We hope today's decision does not signal the administration is returning to the failed policies of the past, leaving much of America's vast energy resources locked up while the nation's demand for energy continues to grow," added Jack Gerard, president of the American Petroleum Institute. "I see this announcement as a sign that after eight long years of rapacious greed and backdoor dealings, our government is returning a sense of balance to the way it manages our lands," actor and activist Robert Redford, a trustee with the Natural Resources Defense Council, said in a statement issued by groups that opposed the leases. Redford owns a home in Utah and hosts the annual Sundance Film Festival there.
Rasmussen:
- Support for the economic recovery plan working its way through Congress has fallen again this week. For the first time, a plurality of voters nationwide oppose the $800-billion-plus plan. The latest Rasmussen Reports national telephone survey found that 37% favor the legislation, 43% are opposed, and 20% are not sure. Two weeks ago, 45% supported the plan. Last week, 42% supported it. Opposition has grown from 34% two weeks ago to 39% last week and 43% today.
Reuters:
- Banks, automakers and other companies that have received U.S. bailout money spent $114 million on lobbying and campaign contributions last year, a watchdog group said on Wednesday. The Center for Responsive Politics said that amounted to a healthy return on investment for companies such as Bank of America and General Motors that were among those that received a total of $295 billion in federal support. "Even in the best economic times, you won't find an investment with a greater payoff than what these companies have been getting," executive director Sheila Krumholz said in a statement. Employees from 161 of those companies also gave a total of $37.5 million to federal candidates in 2007 and 2008, the group said. Top recipients included Connecticut Democratic Senator Christopher Dodd and Montana Democratic Senator Max Baucus, both of whom chair committees that oversee the financial services industry.
- U.S. auto parts suppliers are asking for up to $20.5 billion in federal aid to survive the worst industry downturn in decades, the Automotive News reported on Wednesday.
Financial Times: A senior adviser to Iran’s president says dialogue with the US will succeed only if the Obama administration accepts Tehran’s right to have a nuclear program. The launch of a homemade Iranian satellite on Tuesday further raised concerns among western powers that Iran was accelerating its development of ballistic missile technology. “If [US] policies change the two nations will get closer to each other, the two governments will get closer to each other and the chances for dialogue and co-operation will succeed,” said Mr Samareh. “The policy of [George W.] Bush was to use this [the nuclear issue] as an excuse to stand up against the Iranian nation. He also pointed to the Bush administration’s support for Israel during conflicts such as the offensive in Gaza against Hamas, which is supported by Iran, and the 2006 Israeli war against Hizbollah, another Iran-backed group. “Is the new US administration going to continue these policies? If it does, then nothing will change,” he said.
- Procter & Gamble(PG) is working with Goldman Sachs to identify potential buyers for its pharmaceuticals brands or find other ways to exit the business, people close to the matter said on Wednesday.
MoneyToday:
- The Bank of Korea cut its forecast for South Korea The central bank, which previously forecast a 2% expansion this year, plans to announce its new estimate in April.
China Daily:
- McDonald's(MCD) sales in China were poor last December, Jeff Schwartz, its China CEO, told China Daily. KFC said its sluggish growth in China had already hurt the share price of parent firm Yum Brands Inc.(YUM) With 2,300 outlets nationwide, the company reported only 1 percent growth in same-store sales in the fourth quarter of 2008, compared with 17 percent over the same period in 2007.
Late Buy/Sell Recommendations
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Earnings of Note
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- (BG)/-.89
- (DO)/2.35
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Economic Releases
8:30 am EST
- 4Q Non-farm Productivity is estimated to rise 1.5% versus a 1.3% increase in 3Q.
- 4Q Unit Labor Costs are estimated to rise 2.8% versus a 2.8% increase in 3Q.
- Initial Jobless Claims for last week are estimated to fall to 580K versus 588K the prior week.
- Continuing Claims are expected to rise to 44795K versus 4776k prior.
10:00 am EST
- Factory Orders for December are estimated to fall 3.1% versus a 4.6% decline in November.
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Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by mining and shipping stocks in the region. I expect US
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