Weekend Headlines
- U.S. stocks ended a four-week losing streak with the steepest rally since November after the nation’s three largest banks said they’ve become profitable and General Electric Co. said losing the top credit rating at Standard & Poor’s won’t hurt business. The banks, Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., surged 49 percent or more, propelling a measure of S&P 500 financial stocks to a record gain. GE added 36 percent as S&P raised its outlook to “stable.” All 27 companies in the S&P 500 Retailing Index climbed following a government report showing U.S. chain-store sales beat estimates last month. Schering-Plough Corp. jumped 37 percent after Merck & Co. agreed to buy the drugmaker for $41.1 billion. “It’s been a terrific week,” said Fritz Meyer, the Denver- based senior market strategist for Invesco Aim, which oversees $357 billion. “It would make sense for the market to bottom here and start to rebound as the economic recovery unfolds.”
- Finance chiefs from the biggest developed and emerging economies pledged a “sustained effort” to end the global recession and to cleanse banks of toxic assets. “We were seized by the fact that there was a sense of urgency,” U.K. Chancellor of the Exchequer Alistair Darling told reporters after the Group of 20 finance ministers and central bankers met in southern England yesterday. U.S. counterpart Timothy Geithner said there was a “clear commitment to do what’s necessary, to keep at it, to get the economy on track.”
- Forget Nicolas Sarkozy. Ignore Gordon Brown. Angela Merkel, taking advantage of Germany’s economic heft, is now the European Union’s dominant figure. And leaders from Warsaw to Washington had best not forget it. Just as the German chancellor vetoed a bailout for eastern Europe on March 1, she is now leading European opposition to U.S. President Barack Obama’s call for a global pump-priming package. She’ll determine the fate of a 5 billion-euro ($6.4 billion) infrastructure proposal at an EU summit in Brussels later this week. “It’s Merkel who holds the key to the cashbox, and she doesn’t want to give it up,” says Jean-Dominique Giuliani, chairman of the Robert Schuman Foundation, a research center in Paris.
The euro fell versus the dollar, ending four days of gains, on speculation European nations will fail to increase spending enough to counter the financial turmoil in the region. The 16-nation currency declined against 11 of the 16 major currencies after European officials speaking on the weekend as the Group of 20 finance ministers met in the U.K. said they had spent sufficient money to combat the financial crisis and didn’t want to blow out their budgets. The yen may gain versus the euro after Japanese Finance Minister Kaoru Yosano said the priority should be to boost economic growth, suggesting the government will unveil larger stimulus plans. “The expectation for further monetary easing and the reluctance of expanding fiscal spending will weigh on the euro,” said Satoru Ogasawara, foreign-exchange analyst and economist in Tokyo at Credit Suisse Group AG, the second-largest Swiss bank. “Such policies apply downward pressure on the currency.”
- OPEC agreed to keep oil production quotas unchanged, deciding against a further output cut that risked damaging the ailing global economy. The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s crude oil, will aim to complete existing production cutbacks agreed to late last year and meet again on May 28 to review policy, Secretary-General Abdalla el-Badri said after today’s meeting in Vienna.
- U.S. Treasury Secretary Timothy Geithner said he will soon provide details of his plan to help banks clean up the non-performing assets that are clogging the financial system. “We’re going to move quickly to lay out a new financing program to deal with these legacy assets,” Geithner said in an interview with Bloomberg television yesterday during a meeting of Group of 20 finance ministers in Horsham, England. “We have and expect to see a lot of support for this program” among potential buyers of the assets, he said. Geithner disappointed investors and was criticized by U.S. lawmakers including Senator Kent Conrad of North Dakota, chairman of the budget committee, for outlining plans to address toxic assets without an explanation of how they will work.
- The U.S. government will decide on the future of General Motors Corp. within two weeks, German Finance Minister Peer Steinbrueck after talks with his American counterpart at the Group of 20 meeting outside London.
- Russia could land strategic bombers at Cuban and Venezuelan airfields while conducting patrols, the head of the Russian strategic air force was quoted as saying by the Interfax news service. “With Cuba, this is possible,” the Moscow-based agency quoted Major General Anatoly Zhikharev as saying. “There are four or five airfields with 4,000-meter (13,000-feet) runways which suit us completely.” Russia has also received an offer from Venezuelan President Hugo Chavez to temporarily station bombers on an island, which Zhikharev said was “possible,” according to state television station Vesti-24. “If the heads of the two countries show the will, the political will, then we are prepared to fly there,” Zhikharev said, according to Interfax.
- China, the world’s best-performing stock market, is looking increasingly expensive after valuations climbed to the highest in a year compared with mainland companies traded in Hong Kong. Stocks listed in Shanghai and Shenzhen rose 21 percent since the end of 2008 as local investors snapped up shares on speculation the government’s 4 trillion yuan ($585 billion) stimulus package will boost the slowest growth in seven years. Shares in the yuan-denominated CSI 300 Index traded at 16.2 times earnings this month, compared with 8.6 times for 43 mainland companies in Hong Kong. PetroChina Co., the country’s biggest company, fetches twice the valuation in China as in Hong Kong. The growing gap shows that international investors are losing confidence both in China’s earnings growth and in the country’s ability to help revive the global economy. The last time the difference in multiples was this wide, Chinese shares lost 19 percent in 30 days. The drop in demand around the world is hurting China’s exports. Gross exports accounted for more than 40 percent of the nation’s growth this decade, based on data compiled by the United Nations. Chinese shipments declined by the most in at least 14 years in February, while exports of coal, steel and aluminum plunged at least 40 percent in 2009 from a year earlier.
- Fair-value accounting rules don’t make sense when there’s no market to accurately price securities, Wells Fargo & Co. Chairman Richard Kovacevich said. “Mark-to-market is fundamentally not about a quote on a screen,” Kovacevich said yesterday in a speech at Stanford University in California. “It should always be about expected cash flows.”
- The U.S. sought to ease Chinese Premier Wen Jiabao’s concern about the security of his country’s investments in U.S. government debt, reiterating pledges to cut the budget deficit in half in four years. “There’s no safer investment in the world than in the United States,” White House Press Secretary Robert Gibbs said yesterday at a briefing in Washington.
- Any additional cut in production by OPEC will raise the price of oil and won’t help the global economy recover, Saudi Arabia
- Asian companies will deepen dividend cuts this year because of a “double whammy” from the global recession and tighter bank lending, Deutsche Bank AG said. Dividends may drop 13 percent this year after declining 10 percent in 2008, Deutsche analyst Niklas Olausson wrote in a report today.
- The cost of protecting investors in Asian bonds from default fell after the Group of 20 nations pledged coordinated action to help rid banks of toxic assets blamed for causing the credit crunch. The Markit iTraxx Japan index of credit-default swaps was 5 basis points lower at 545 as of 10:01 a.m. in Tokyo, Barclays Capital prices show. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan was also 5 basis points lower at 420 as of 9:25 a.m. in Hong Kong, according to ICAP Plc.
- Foreign direct investment in China fell for a fifth month in February as companies trimmed spending to weather the worst financial crisis since the Great Depression. Investment dropped 15.8 percent to $5.83 billion from a year earlier, the commerce ministry said at a briefing in Beijing today. That compared with a 32.6 percent decline in January.
Wall Street Journal:
- Troubled insurer American International Group Inc., now 80% owned by U.S. taxpayers, spent the weekend deflecting mounting criticism of how government funds have been funneled to various banks and used to pay employee bonuses at the business unit that almost sank the company. After calls for more transparency, AIG disclosed Sunday that roughly two-thirds of the $173.3 billion in federal aid it received has been paid out to trading partners such as banks and municipalities in the U.S. and abroad. The list of AIG's trading partners reads like a who's who of global finance. It includes big U.S. banks such as Goldman Sachs, which received nearly $13 billion. Large European firms, such as Société Générale and Deutsche Bank also appear, each having received nearly $12 billion. Much, but not all, of the money was linked to contracts AIG sold the firms to insure against losses on securities -- notably those related to U.S. mortgages. As AIG's condition deteriorated, the trading partners were given more collateral to protect against losses. Some were made whole late last year when the securities were bought by a company funded largely by the Federal Reserve.
- In a rare direct message to the American people, Federal Reserve Chairman Ben Bernanke appeared on CBS TV's "60 Minutes" and defended government actions being taken to shore up the banking system, saying that a recovery won't happen until the financial system stabilizes. And the self-professed "Main Street" guy, who once worked construction and waited tables in a poncho, delivered a strong rebuke to some on Wall Street, saying "the era of this high living, this is over now." "I'd just like to say to the American people...that I have every confidence that this economy will recover, and recover in a strong and sustained way," Mr. Bernanke said in the "60 Minutes" interview aired Sunday night. For its part, the Fed "is going to do everything possible to support this recovery," Mr. Bernanke said, according to a transcript of the interview.
- After failing to sign up enough investors in time to launch the Term Asset-Backed Loan Facility early this coming week, the Federal Reserve and Wall Street are reworking the TALF program at the 11th hour. The Fed delayed the program's launch by two days, until Thursday. Wall Street dealers, including J.P. Morgan Chase & Co. and Barclays PLC's Barclays Capital, have created vehicles to participate in the TALF that would allow investors in the program to circumvent many of the restrictions laid out by the Fed. The vehicles resemble collateralized debt obligations, or CDOs, and use some of the financial engineering that was partially responsible for the collapse of the credit markets.
- Chinese steelmaker Angang Steel Co. aims to raise its steel production by 25% this year, a company official said Friday.
- Eager to cash in on stimulus packages in China, the U.S. and Europe, some steelmakers are ramping up production. But some are moving too quickly, causing steel prices to drop again after recovering earlier this year. The situation illustrates the dilemma for industries that need to fill the pipeline with construction-critical products but are uncertain about when they will be needed. China, in particular, is beginning to see steel prices slide after the capacity utilization of the country's steel mills increased in recent months to about 90% from 75%.
CNBC.com: The Obama administration's plan to purchase toxic assets from the banks in a public/private partnership could be made public as soon as this week, according to senior administration officials.
- The Financial Accounting Standards Board is planning to discuss mark-to- market accounting rules on Monday. The FASB says it will discuss "additional application guidance that would clarify" how mark-to-market is used in illiquid markets.
- The U.S. Securities and Exchange Commission said Friday it will meet on April 8 to consider whether to propose short sale price test rules.
IBD:
Can retail dynamo Aeropostale (ARO) follow the same recipe it's used to whet teens' appetites to win over their younger brothers and sisters?
NY Times:
- Plenty of laid-off workers across the country, burned out by a merciless job market, are building business plans instead of sending out résumés. For these people, recession has become the mother of invention. Economists say that when the economy takes a dive, it is common for people to turn to their inner entrepreneur to try to make their own work.
- The goal behind municipal financing is to eliminate perhaps the largest disincentive to installing solar power systems: the enormous initial cost. Although private financing is available through solar companies, homeowners often balk because they worry that they will not stay in the house long enough to have the investment — which runs about $48,000 for an average home and tens of thousands of dollars more for a larger home in a hot climate — pay off.
- TrapCall, offered by TelTech Systems Inc., based in New Jersey, diverts an anonymous call to an 800 number, and then discloses the incoming number and name to the intended recipient, said Meir Cohen, president and co-founder of the company. The caller hears a normal ring tone and is unaware that the call is being traced to its source. In the four weeks since TrapCall was introduced, 200,000 people have registered for the service, which is free. Another free service called Google Voice, which will make its national debut in a few weeks, offers a similar service. Callers from those numbers will hear a recording, similar to TrapCall’s, saying the number is no longer in service.
- In pockets of the American economy the hunt for game-changing stars remains surprisingly intense. Competitors in entertainment, venture capital and medical research keep racing to sign the right people and turn them loose on winning projects. Finding the next big hit can save the day, but running out of talent is a recipe for extinction.
- The master’s of business administration, a gateway credential throughout corporate America, is especially coveted on Wall Street; in recent years, top business schools have routinely sent more than 40 percent of their graduates into the world of finance. But with the economy in disarray and so many financial firms in free fall, analysts, and even educators themselves, are wondering if the way business students are taught may have contributed to the most serious economic crisis in decades.
Philly.com: From his decisions on who would keep their property-tax rebates all the way down to the call on which drinks to tax - wine, for example, but not beer – NJ Gov. Corzine and his aides have said his new budget makes tough choices, but protects the typical New Jerseyan. Opponents have had a different take. Republicans called the budget "a declaration of war on the middle class" and said the governor had "stabbed the average middle-class taxpayer in the back," adding voltage to an already-charged election year.
CNNMoney.com:
- Apple’s(AAPL) App Store: How to make a quick $1.5 million.
Business Week: BMW’s Push into Electric Cars. Consultant Bain & Co. figures battery costs could fall to $4,000 per vehicle by 2020, which means the showroom price of an electric could be as low as $20,000—about half what most manufacturers envision for their first electric models. At that level, Bain estimates, automakers could sell as many as 175,000 electrics a year in the U.S. alone. "We can bring these vehicles to market for a reasonable price," Reithofer says.
Politico:
- When Robert Gibbs was asked Friday about Jon Stewart's grilling of CNBC "Mad Money" host Jim Cramer, the White House press secretary flashed a smile, and told reporters that he "enjoyed it thoroughly." Gibbs reaction to the Thursday "Daily Show" interview isn't surprising, given that he and President Barack Obama have been complaining a lot lately about the white noise of "cable chatter" in the midst of financial crisis. Upon the cancellation of CNN’s "Crossfire," network president Jon Klein noted the Stewart critique, telling the Washington Post that "he made a good point about the noise level of these types of shows, which does nothing to illuminate the issues of the day." Carlson, reached Friday, described Stewart as "a partisan demagogue." "Jim Cramer may be sweaty and pathetic — he certainly was last night — but he's not responsible for the current recession," Carlson told POLITICO. "His real sin was attacking Obama's economic policies. If he hadn't done that, Stewart never would have gone after him. Stewart's doing Obama's bidding. It's that simple."
- A broad coalition of left-leaning groups is quietly closing ranks into a new coalition, "Unity '09," aimed at helping President Barack Obama push his agenda through Congress. Conceived at a New York meeting before the November election, two Democrats familiar with the planning said, Unity '09 will draw together money and grassroots organizations to pressure lawmakers in their home states to back White House legislation and other progressive causes. The online-based MoveOn.org is a central player in the nascent organization, but other groups involved in planning Unity '09 span a broad spectrum of interests, from the American Civil Liberties Union to the National Council of La Raza to Planned Parenthood, as well as labor unions and environmental groups. The group is still in its early stages, and its organizers have adopted a secretive posture: Several of the people involved did not respond to emails over the last two days, even though one of them, former MoveOn executive director Eli Pariser, has programmed his MoveOn email account to assure correspondents that he is using the account for messages "including Unity '09 work."
ABCNews:
- Even if Chrysler LLC gets additional government loans, it could face another cash shortage in July when revenue dries up as the company shuts down its factories for two weeks to change from one model year to the next, its chief financial officer said.
Reuters:
- Dubai
- U.S. President Barack Obama will announce steps on Monday to make it easier for small business owners to borrow money, using $730 million in stimulus funds to cut lending fees, boost loan guarantees and expand other programs, officials said. "We know that small businesses are the engine of growth in the economy," said Christina Romer, chair of the White House Council of Economic Advisers. "We absolutely want to do things to help them."
- Top 10 largest recipients of AIG money. American International Group Inc (AIG)
disclosed on Sunday that U.S. and European banks have been among the biggest beneficiaries of the up to $180 billion U.S. taxpayer bailout of the insurer. AIG disclosed that more than $90 billion has been paid to banks through collateral postings under credit default swaps, payments to CDS counterparties and payments to securities lending counterparties from Sept. 16, 2008 to Dec. 31, 2008. The following lists the largest recipients of funds from those entities combined. The figures are estimates based on data
provided by AIG:
TimesOnline: Secretive hedge funds will eventually be subject to the same supervisory rules as banks, under a tightening of Britain’s system of regulation. The changes, which will require banks and other lenders to build up their reserves in healthy economic times, could become the basis for international efforts to overhaul regulation at the G20 summit in London on April 2. The moves will be proposed on Wednesday in a report by Lord Turner of Ecchinswell, chairman of the Financial Services Authority, who will call for an overhaul of the tripartite links between the FSA, the Bank of England and the Treasury.
Telegraph:
- Barclays is close to selling a large part of its $1trillion fund management arm as its board weighs up whether to enlist taxpayer support for tens of billions of pounds worth of toxic assets. The bank, led by John Varley, its chief executive, is sounding out potential buyers of iShares, the division of the bank that specializes in exchange-traded funds and which accounts for a quarter of the funds under management of Barclays Global Investors (BGI).
BBC:
- The leader of Lebanon's Islamist Hezbollah movement, Hassan Nasrallah, has said his group will never recognize Israel's right to exist. He was responding to a US suggestion that both Hezbollah and the Palestinian faction Hamas should recognise Israel before expecting any US engagement. "We reject the American conditions," he said. "As long as Hezbollah exists, it will never recognize Israel."
Interfax:
- Russia
Press Trust of India :
India
Nikkei:
- Iraq The Mideast nation is studying technical details of proposals for development of its Nasiriyah field and a refinery, Shahristani said. Two European alliances led by Italy’s Eni SpA and Spain’s Repsol YPF SA and a Japanese group comprising Nippon Oil Corp., Inpex Corp.s and JGC Corp. are competing to develop the field in southern Iraq with an estimated daily output of 300,000 barrels.
Press TV:
- Iran and China signed a $3.3 billion agreement to develop natural gas reserves in the Persian Gulf state’s South Pars field. A European partner may join the project within three months.
Weekend Recommendations
Barron's:
- Made positive comments on (GS), (JPM), (NLY), (CNX), (DTV), (AVP) and (MS).
Citigroup:
- Reiterated Buy on (PCLN), target $105.
Night Trading
Asian indices are unch. to +1.25% on avg.
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Global Commentary WSJ Intl Markets Performance Commodity Futures Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Earnings Calendar
Conference Calendar
Who’s Speaking?
Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/Estimate
- (FIG)/.01
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Empire Manufacturing for March is estimated at -30.80 versus -34.654 in February.
9:00 am EST
- Net Long-term TIC Flows for January are estimated at $45.0B versus $34.8B in December.
9:15 am EST
- Industrial Production for February is estimated at -1.3% versus -1.8% in January.
- Capacity Utilization for February is estimated at 71.0% versus 72.0% in January.
1:00 pm EST
- The NAHB Housing Market Index for March is estimated at 9 versus 9 in February.
Other Potential Market Movers
- The Cowen Healthcare Conference and (AGO) Shareholders Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and automaker shares in the region. I expect US The Portfolio is 100% net long heading into the week.
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