Late-Night Headlines
Bloomberg:
- Treasury three-month bill rates rose to a more than three-month high as credit markets improved and speculation increased that the government will boost the economic stimulus package, according to Miller Tabak & Co. The rate climbed seven basis points to 0.31 percent at 4:49 p.m. in New York. That’s the highest level since 0.39 percent on Nov. 12, when Congress was debating an automaker bailout amid concern the industry would collapse. Rates turned negative Dec. 9 for the first time ever as investors rushed to Treasuries as a safe haven. It averaged 3.03 percent for the last five years. “Following several months of hiding under rocks, investors are peeking out,” Tony Crescenzi, chief bond-market strategist at Miller Tabak in New York, wrote in a note to clients today. “This is apparent in T-bill yields, which have moved up sharply since the beginning of last week.” Since short-term Treasuries “are likely to remain anchored to the low fed funds rate,” Crescenzi said. “The yield curve will steepen. Its degree of steepening indicates that the odds of recession one year hence have fallen substantially.” The Federal Reserve lowered its target interest rate for overnight loans between banks to between zero and 0.25 percent from 1 percent in December. The difference in yields between two- and 10-year notes, known as the yield curve, has increased by about 31 basis points to 192 basis points since the Fed cut its target on Dec. 16.
- The cost of protecting bonds from default fell in Asia and was little changed in Australia The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 5 basis points to 355 at 8:30 am in Hong Kong , according to BNP Paribas SA prices. The Markit iTraxx Japan
- Hong Kong’s Hang Seng China Enterprises Index may drop 40%, extending a 15-month slump, as earnings growth stalls amid an economic slowdown, according to Bank of America Corp.(BAC). The benchmark, which tracks PetroChina Co. and 42 other mainland companies listed in Hong Kong, may decline to 4,200 in the first half of this year, predicted David Cui, the China strategist for Bank of America’s Merrill Lynch unit. It’s “a long way from a bull market,” Hong Kong-based Cui wrote. Stocks may trade in a range “for a few years until a prospect of economy and corporate earnings resuming decisive healthy growth is in sight.” The HSCEI, which closed at 6,960.11 yesterday, tumbled 66% since setting a record in October 2007. China faces its slowest economic growth in almost two decades, threatening to erode earnings at companies including PetroChina, the country’s biggest oil producer. Analyst may reduce their profit forecast for the index’s companies by at least 20% after first-quarter results are announced, he said.
- Walt Disney Co.(DIS), the second-largest U.S. media company, posted a 32 percent drop in fiscal first- quarter profit and will cut more jobs in response to the deepening U.S. recession. The shares fell in late trading.
- MetLife Inc.(MET), the largest U.S. life insurer, said fourth-quarter profit declined 12 percent on losses from hedge funds and real estate ventures. Shares gained in extended trading as the company beat analysts’ estimates
- The Massachusetts Pension Reserves Investment Management Board, which oversees $38 billion, voted to fire hedge-fund firm Austin Capital Management after losing $12 million with alleged Ponzi scheme operator Bernard Madoff. The state pension board also decided at a meeting in Boston today to dismiss Ivy Asset Management, the hedge-fund unit of Bank of New York Mellon Corp., because several senior managers have left the firm. About $430 million in pension assets were invested with Ivy and $130 million with Austin, the board said.
- Senate Republicans blocked a Democratic bid to add $25 billion in infrastructure spending to an economic stimulus package sought by President Barack Obama. After the vote on the amendment, Republicans said they opposed the attempt to “balloon” the package’s size. “We need to sober up here and take a look at what we’re doing,” said Senate Minority Leader Mitch McConnell, a Kentucky Republican. “Most of my members feel you can get the job done with a lot less.” Some Democrats are pushing to reallocate $50 billion to fight housing foreclosures, while others want to drop tens of billions in spending they say would do little to create jobs. “A number of Democrats have said they want to see changes in the bill before they can vote for it, said Senate Majority Whip Richard Durbin, an Illinois Democrat. Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said lawmakers tonight will take up a proposal to offer companies an 85 percent discount on taxes on corporate profits earned abroad. The plan, sponsored by California Democrat Barbara Boxer and Nevada Republican John Ensign, would cut the tax this year and next to 5.25 percent from as much as 35 percent.
- President Barack Obama for the first time said he opposed a stringent “Buy American” provision in stimulus legislation being debated in Congress, saying it may trigger a trade war the U.S. can’t afford. A signal of protectionism from the U.S. “ would be a mistake right now” because “trade is sinking all across the globe,” Obama said in an interview with ABC News.
- FedEx Corp.’s(FDX) home airport in Memphis, Tennessee, remained the world’s busiest for cargo in 2008, weathering a decline in shipping during the recession and a challenge from Hong Kong. Almost 3.7 million metric tons of cargo moved through Memphis International Airport, a drop of 3.8 percent from 2007. The volume was enough to stay ahead of Hong Kong’s total of about 3.63 million metric tons, a 3.1 percent slide.
- The euro fell toward an eight-week low against the US dollar before a report that may show retail sales slid for a seventh month, supporting the case for the European Central Bank to cut interest rates. The British pound weakened versus the greenback on concern an industry report will show U.K. services shrank at close to the fastest pace in 12 years.
- China’s manufacturing shrank for a fourth month as exports fell because of the global recession and companies ran down stockpiles of steel, textiles and autos, a government-backed survey showed. The Purchasing Managers’ Index rose to a seasonally adjusted 45.3 in January, from 41.2 in December, the China Federation of Logistics and Purchasing said today in an e-mailed statement. A reading below 50 indicates a contraction. A slowdown in the world’s third-biggest economy has already cost the jobs of 20 million migrant workers, increasing the risk of protests and social unrest, the government says. China
- Thomas A. Daschle’s departure as President Barack Obama’s choice as health chief is likely to delay for months the momentum for an overhaul of the U.S. system. None of about a half-dozen potential successors to Daschle as the U.S. Health and Human Services Department secretary carry the political influence and health-care expertise of the former Senate majority leader, analysts said. Among the possible replacements mentioned by lawmakers and activists are Kansas Governor Kathleen Sebelius; U.S. Representative Rosa DeLauro of Connecticut; Mark McClellan, a former head of the Food and Drug Administration; and former Democratic Party chief Howard Dean.
- The Obama administration, aiming to overhaul the $700 billion financial-rescue program, is refocusing on an effort to guarantee illiquid assets against losses without taking them off banks’ balance sheets. Treasury Secretary Timothy Geithner is skeptical of setting up a so-called bad bank to hold the toxic securities, an option that still may form part of the final package, people familiar with the matter said.
Wall Street Journal:
- A string of dire profit warnings has signaled a rapid deterioration in the financial health of Chinese companies on which the world's third-biggest economy heavily depends, putting more pressure on the government to enhance its stimulus efforts. Corporate investment is hugely important to China's economy, where capital spending accounts for more than 40% of annual output, one of the highest ratios in the world. The profit decline will have major effects across the economy as companies have less money to buy new equipment or expand their businesses.
- Stimulus Brings Out City Wish Lists: Neon for Vegas, Harley for Shreveport. Most Ask for Roads, Sewers, but Some Want the Kitchen Sink – and a Frisbee Gold Course. Las Vegas, which by some accounts already glitters, wants $2 million for neon signs. Boynton Beach, Fla., is looking for $4.5 million for an "eco park" featuring butterfly gardens and gopher tortoises. And Chula Vista, Calif., would like $500,000 to create a place for dogs to run off the leash. These are among 18,750 projects listed in "Ready to Go," the U.S. Conference of Mayors' wish list for funding from the stimulus bill moving through Congress. The group asked cities and towns to suggest "shovel ready" projects for the report, which it gave to Congress and the Obama administration.
- House Financial Services Committee Chairman Barney Frank said the first priority in overhauling financial regulation is to set up an entity to oversee systemic risks of the kind that walloped Wall Street last year. Mr. Frank, a Massachusetts Democrat, said this oversight could be given to the Federal Reserve and a general plan may be in place by April.
- President Barack Obama's nominee to head the Commodity Futures Trading Commission promised in correspondence with lawmakers he would usher in a new era of regulation. Senators have raised concerns in recent weeks about Gary Gensler's prior tenure as a Treasury official, when the government deregulated derivatives markets, a move some say contributed to the current financial crisis. Sen. Tom Harkin (D., Iowa), the panel's chairman, said after meeting the former Clinton administration official last week that he was still concerned about the "deregulatory orientation in this nominee's past." Mr. Gensler served at the Treasury in 2000, when Congress passed the Commodity Futures Modernization Act, or CFMA, which essentially deregulated complex financial instruments called credit-default swaps. He was one of the officials responsible for examining what kind of regulatory overhaul, if any, was necessary for the swaps market. Critics contend the CFMA allowed for the lax oversight that helped lead to the eventual collapse of Lehman Brothers Holdings Inc. and other troubled financial companies. Mr. Gensler was picked in December to head the CFTC. Mr. Gensler, a former Treasury undersecretary, was a partner at Goldman Sachs Group Inc. for nearly a decade.
- Senior U.S. commanders are finalizing plans to send tens of thousands of reinforcements to Afghanistan's main opium-producing region and its porous border with Pakistan, moves that will form the core of President Barack Obama's emerging Afghan war strategy.
- President Barack Obama plans to unveil a series of new pay curbs Wednesday, including strict limits to executive salaries, the latest salvo from Washington aimed at curbing financial firms receiving federal assistance. Among the new restrictions being considered is a $500,000 cap on salaries for executives at companies that receive a substantial amount of government aid, according to a person familiar with the matter. Executives would be able to get additional compensation in the form of restricted stock or other compensation that's tied to the long-term health of the company. The Obama administration also plans to bar chief executives of such firms from receiving severance payments. And it is expected to require that firms receiving taxpayer money give shareholders more say in how top executives are compensated, according to people familiar with the administration's plans.
MarketWatch.com: Illumina, Inc. (ILMN) today announced its financial results for the fourth quarter and fiscal year 2008. For the fourth quarter of 2008, Illumina reported revenue of $160.9 million, a 43% increase over the $112.6 million reported in the fourth quarter of 2007 and a 7% increase over revenue of $150.3 million in the third quarter of 2008. This represents the Company's 30th consecutive quarter of revenue growth. The stock rose 7.2% in after-hours trading.
CNBC.com: If investing in the mortgage market was somewhat easier to do, would you dip a toe? If so, there are two new ETFs you should know about!
- Stocks making you cranky? Find out why Raymond James chief investment strategist Jeff Saut tells us it’s a mistake to get too bearish.
NY Times:
- Doubledown Media, which chronicled the lavish life of bankers in magazines like Trader Monthly and Dealmaker, has suspended operations.
- A longstanding tradition of the Berkshire Hathaway annual meeting has been the yearly dinner hosted by Alice Schroeder, whom Warren E. Buffett chose to write his biography, “The Snowball,” which was published last September. For over a decade, several hundred people gathered at a country club in Omaha, where Ms. Schroeder would pepper Mr. Buffett with questions. But Mr. Buffett has canceled the dinner for this year’s meeting in early May, apparently because of his displeasure with some aspects of Ms. Schroeder’s 960-page encyclopedic best seller about his life. The book portrays Susan Buffett as being disappointed in her marriage to Mr. Buffett, prompting her to move to San Francisco. She introduced him to another woman in Omaha, Astrid Menks, and she and Mr. Buffett maintained a relationship for years. He married her after Susan ’s death. Mr. Buffett’s relations with both women were never a secret — in the book he is quoted as saying: “Susie put me together, and Astrid keeps me together. They both need to give, and I’m a great receiver, so it works for them.”
IBD:
- In today's lean job market, Capella Education (CPLA) is scoring high marks with professionals looking to sharpen their skills and boost their earning power. Like many for-profit online educators, Capella's business is booming as it cashes in on the push by working adults to advance their careers by going back to school.
HedgeFund.net:
- John Meriwether’s hedge fund firm JWM Partners is reportedly considering starting up a new fund, even after a year that saw personnel and fund losses. JWM’s flagship fund was down 42% at the end of December, causing the firm to cut back on personnel. Ten staff members and four partners left the firm at the end of last year. That was on top of an earlier 2008 cut of 13 staff members and two partners. Meriwether founded Connecticut-based JWM in 1999, after his former firm, Long Term Capital Management, lost $4.6 billion when Russia defaulted on its debt. LTCM was the largest hedge fund blowup at its time, and the Federal Reserve, nervous about the implosion’s effect on the markets, organized a $3.6 billion bailout by a group of Wall Street banks.
World Gas Intelligence:
- Natural gas futures in NY may drop by 50% as the global recession wipes out industrial demand for the cleaner fuel. Gas prices may average less than $3.50 per million British thermal units from March through October, and may drop below $2, according to the report, which citied Ron Denhardt, vice president of natural gas services for Strategic Energy and Economic Research. Industrial gas consumption may have declined by more than 1.5 billion cubic feet per day. The volume of gas in storage in the US Normal weather and a production rate estimated at 4% lower than last year’s average would make 4.3 trillion cubic feet of gas available for storage by October compared with an estimated 4 trillion cubic feet of storage capacity.
Seattlepi.com:
- The NAACP's new leader intends to hold President Barack Obama accountable for his promises about civil rights regardless of Obama's status as the first black occupant of the White House. "The president being black gives us no advantage," NAACP President and CEO Benjamin Todd Jealous said Tuesday in an interview with The Associated Press, adding that Obama's background as a community organizer and civil rights lawyer may make him more receptive to the NAACP's agenda.
AP:
- The Senate has voted to give a tax break to new car buyers, setting aside bipartisan concern over the size of an economic stimulus bill costing nearly $900 billion. The vote was 71-26 to allow many car buyers to claim an income tax deduction for the cost of automobile sales taxes and interest payments on car loans. Sen. Barbara Mikulski proposed the tax break, which would go to individuals earning up to $125,000 and couples with incomes of as much as $250,000.
Reuters:
- U.S. Secretary of State Hillary Clinton cautioned Tehran of "consequences" if it did not give up sensitive nuclear work and said world powers would discuss a new Iran strategy in talks on Wednesday. Speaking on Tuesday after meeting separately with British and German foreign ministers, Clinton said the State Department's point man on Iran, Bill Burns, would put forward the U.S. view at a meeting in Germany with diplomats from China, Russia, Britain, Germany and France.
- U.S. crude stockpiles jumped 8.1 million barrels last week, according to a report Tuesday from the American Petroleum Institute -- drawing disbelief from energy analysts expecting a much smaller build. The jump in inventories, nearly three times bigger than analysts had anticipated, came despite a decline in oil imports of 1.3 million barrels per day and an increase in refinery runs of 438,000 bpd, according to the report.
- Ticketmaster Entertainment Inc and Live Nation Inc may unveil a merger as soon as this week, creating a music industry powerhouse with a combined market value of over $700 million, a source briefed on the talks told Reuters on Tuesday.
Financial Times: Commodities investors in simple, long-only passive indices suffered hefty losses last month as they shouldered the unusually high cost of rolling positions into forward contracts as well as falling spot prices, Standard & Poor’s said on Tuesday. The futures curve for raw materials such as oil, natural gas and corn has moved abruptly to an upward slope in the last few weeks, a situation that makes investing in commodities indices such as the S&P GSCI or the DJ AIG far less profitable. The problem is particularly acute in the oil market, which usually represents a large share of commodities baskets. S&P said that oil-related losses were 18.9 per cent in January, with two-thirds emanating from the roll. S&P said: “The spot price of crude oil dropped 6.55 per cent on the month, but rolling from the February to the March future contracts accounted for most of the remaining 12.35 per cent of the decline in the component index”. The shape of the futures curve is crucial to the profitability of commodities indices. In addition to the spot return, commodity index investors obtain a separate return, known as the roll yield, from the shape of the curve as they roll their trades over each month, just before the futures contract expires. That return is positive when futures prices are lower than the prevailing front-month price (a backward-dated market) and negative when futures prices are higher (a contango market). The contango market is likely to trigger further losses this month as investors in the S&P GSCI or the popular United States Oil Fund, an exchange traded commodity vehicle, prepare to roll their positions starting on Friday.
TimesOnline: President Obama will convene the most ambitious arms reduction talks with Russia for a generation, aiming to slash each country’s stockpile of nuclear weapons by 80 per cent. The radical treaty would cut the number of nuclear warheads to 1,000 each, The Times has learnt. Key to the initiative is a review of the Bush Administration’s plan for a US missile defense shield in Eastern Europe, a project fiercely opposed by Moscow. Efforts to revive the Start talks were fitful under Mr Bush and complicated by his insistence on building a missile defence shield. “If Obama proceeds down this route, this will be a major departure,” one Republican said. “But there will be trouble in Congress.” The plan is also complicated by the nuclear ambitions of Iran, which launched its first satellite into space yesterday, and North Korea, which is preparing to test a long-range ballistic missile capable of striking the US. Mr Obama views the reduction of arms by the US and Russia as critical to efforts to persuade countries such as Iran not to develop the Bomb.
Oriental Morning Post:
- Volkswagen AG may delay expanding a plant in China
South China Morning Post:
- Hong Kong performing arts, which have seen a rise in attendance over the past few years, have been battered by the economic crisis, with audience numbers in sharp decline.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MAN), target $34.
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
- (GR)/1.02
- (WWW)/.45
- (TMO)/.83
- (ITT)/.77
- (MO)/.61
- (KFT)/.44
- (RL)/.86
- (R)/1.03
- (TWX)/.26
- (CSCO)/.30
- (BMC)/.58
- (PRU)/-1.19
- (PHM)/-.77
- (DLB)/.42
- (V)/.66
- (AVB)/.40
- (SUN)/2.17
- (DVN)/1.09
- (CLX)/.59
- (SLE)/.21
- (AGN)/.73
- (AKAM)/.40
- (NVLS)/-.16
Economic Releases
8:15 am EST
- The ADP Employment Change for January is estimated at -535K versus -693K in December.
10:00 am EST
- The ISM Non-Manufacturing Index for January is estimated to fall to 39.0 versus 40.1 in December.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +3,000,000 barrels versus a +6,218,000 barrel increase the prior week. Gasoline supplies are expected to rise by +900,000 barrels versus a -121,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,300,000 barrels versus a -1,005,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a -.79% decline the prior week.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are higher, boosted by automaker and technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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