Late-Night Headlines
Bloomberg:
- The cost of protecting Asia-Pacific bonds from default fell after the Federal Reserve unexpectedly announced plans to buy $1 trillion of bonds in an effort to lower borrowing costs and spur the economy. The Markit iTraxx Australia index of credit-default swaps fell 15 basis points to 375 as of 10:38 a.m. in Sydney, Citigroup Inc. data show. The Markit iTraxx Japan index fell 10 basis points to 475 at 9:55 a.m. in Tokyo, Barclays Capital prices show. The Japanese benchmark has fallen from a record 565 basis points on March 12, according to CMA DataVision.
- Oracle Corp.(ORCL), the world’s second- largest software maker, reported third-quarter profit that topped analysts’ estimates after support contracts helped make up for slowing orders. The company also announced its first dividend, sending the shares up 7.3 percent in late trading. Excluding some costs, profit rose to 35 cents in the period ended Feb. 28, Oracle said today in a statement. That compared with a 32-cent average estimate in a Bloomberg survey of analysts.
- The outrage expressed by President Barack Obama and Democrats in Congress over $165 million in bonuses paid to American International Group Inc. may be undercut by their tacit approval of the payouts only a month ago. The $787 billion economic stimulus bill approved by Congress Feb. 13 and signed into law by Obama three days later contains language that effectively authorizes bonus arrangements at companies receiving taxpayer bailouts as long as they were in place before Feb. 11. The provision, on page 404 of the 407-page law, carves out those arrangements from new restrictions on pay at bailed-out companies that took effect with Obama’s signature. Now Obama and many of the same lawmakers who voted for the law, such as New York Senator Charles Schumer and Banking Committee Chairman Chris Dodd, are demanding AIG employees surrender their bonuses. Dodd told CNN today he put the provision in the final version of the stimulus measure at the insistence of the administration, which was worried about lawsuits if existing compensation contracts were revoked. The provision has proven awkward for Democrats who have led expressions of outrage in Congress this week, because most of them voted for the stimulus last month. No House Republicans and only three Senate Republicans voted for the stimulus measure. “The fact is that the bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate,” Iowa Republican Senator Charles Grassley said in a statement today. “There was no transparency, so the only way the public will ever know who added the language to protect bailout company bonuses is if someone from the small group of Democrats in the room says so,” Grassley said.
- Investors pulled out a total of $25 billion from hedge funds in February, the seventh consecutive month of redemptions, as stocks worldwide tumbled amid signs a global recession is deepening, an industry report shows. Total hedge-fund assets stood at $1.36 trillion at the end of February, down about $600 billion from their peak in June 2008, according to a monthly asset flow report by Eurekahedge Pte. In January, final net withdrawals totaled $95 billion, according to the Singapore-based research firm.
- China Huiyuan Juice Group Ltd., fell by a record 52 percent in Hong Kong trading after Chinese regulators blocked Coca-Cola Co.’s $2.3 billion takeover bid for the country’s biggest domestic juicemaker.
- Goldman Sachs Group Inc.(GS), the largest U.S. securities firm to convert to a bank, closed above $100 in New York trading for the first time since Oct. 24 as investors gained confidence the company will become profitable. The shares rose $6.26, or 6.3 percent, to $105.25 in New York Stock Exchange composite trading, bringing the increase to 25 percent this year. Goldman Sachs, led by Chief Executive Officer Lloyd Blankfein, was the world’s biggest and most-profitable securities firm until it converted to a bank holding company following the bankruptcy of Lehman Brothers Holdings Inc. in September. The New York-based company also received $10 billion from the U.S. government in October.
- Nike Inc.(NKE), the world’s largest athletic-shoe maker, said third-quarter profit fell as sales declined for the first time in more than seven years. Sales dropped 2 percent to $4.4 billion, the Beaverton, Oregon-based company said today in a statement. Futures orders dropped 1 percent in the U.S., 25 percent in Nike’s Europe, Middle East and Africa region, and 1 percent in Asia Pacific.
- European Union leaders are likely to decline to pump more money into the stricken economy at a two-day summit starting today, bucking evidence of a deepening worldwide recession. The bloc’s 27 chiefs gathering in Brussels are set to stand by a planned 400 billion-euro ($525 billion) stimulus package while haggling over which infrastructure projects are eligible for the final 5 billion euros. “Significant additional fiscal stimulus does not seem to be on the cards in Europe,” said Nick Kounis, chief European economist at Fortis Bank in Amsterdam. “Not many countries actually have much further room.”
- China is tightening controls on foreign news organizations in the country by restricting the work of Chinese news assistants, backsliding on a pledge to allow greater media freedom, Human Rights Watch said. Under a code of conduct introduced last month, assistants of foreign correspondents in China are barred from “independent reporting” and required to “propagate positive information,” the New York-based group reported.
Wall Street Journal:
- More financial companies that are being propped up with federal money are facing political heat over bonus payments to executives. Fannie Mae is due to pay retention bonuses of between $470,000 and $611,000 this year to some executives, despite enormous losses at the government-backed mortgage company. Fannie's main rival, Freddie Mac, also plans to pay such bonuses but hasn't yet provided details.
- Iconic American companies - ranging from the brick-and-mortar to the Internet-based - are paying more attention to their mobile offerings, often partnering with start-ups to reach on-the-go customers. “We want to move with this fast-moving tide,” said Douglas Brown, senior vice president of mobile product development at Bank of America Corp., which now has 2.3 million customers doing their banking via mobile devices. Brown joined other executives in a panel discussion Wednesday about “mobilizing business” at the Dow Jones Wireless Innovations 2009 conference in Redwood City, Calif.
- Priceline.com Inc.(PCLN) is expected to announce Thursday that it will launch a price guarantee on airline ticket purchases and package bookings made through June 1, similar to programs announced recently by other online travel agencies. The "Pricedrop Protection" program promises to automatically reimburse travelers if they book an airline ticket or package on priceline.com, and then someone else books the same ticket or package at a lower price.
- How Hedge Funds Siphoned AIG Bailout Cash. Hedge fund manager Patrick Morris of Hagen Capital explains to Dow Jones Newswires’ Simon Constable how money to fund the beleaguered insurance giant found its way to unregulated money managers. (video)
Barron’s:
- A More Bullish Picture Emerges. The technicals are pointing in a positive direction, both for the short and long term.
CNBC.com: Is Fed Getting Hold on Crisis? The Federal Reserve surprised Wall Street Wednesday and said it will buy long-term Treasury bonds for the first time in four decades in an effort to revive the recession-hit economy. The move sent 30-year mortgage rates to around their lowest levels on record. Now investors are wondering if Fed Chairman Ben Bernanke had this bazooka ready to fire when he sat down with 60 Minutes on Sunday. At the time he said, “I do think that we will get (the economy) stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."
NY Times:
- The Federal Reserve sharply stepped up its efforts to bolster the economy on Wednesday, announcing that it would pump an extra $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.
Slate:
- The Real AIG Scandal by Eliot Spitzer. It’s not the bonuses. It’s that AIG’s counterparties are getting paid back in full. Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars? Why did Goldman(GS) have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed? The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.
Dow Jones:
- Citigroup Inc.(C) plans to seek shareholder approval fro 40 billion new shares to help cover employee compensation in addition to the bank’s capital restructuring, citing two people familiar with the matter. Morgan Stanley(MS) may also seek shareholder approval to authorize more shares to pay compensation.
USA Today.com:
- From Indianapolis comes the story that federal prison officials are easing restrictions on American-born Taliban soldier John Walker Lindh, moves that his attorney said Wednesday will allow Lindh to tell his story for the first time.
- Jeff Zucker, the chief executive of NBC Universal, called comedian Jon Stewart's attacks on business network CNBC "incredibly unfair." At a media conference Wednesday in New York, Zucker said the Daily Show host's recent criticisms of CNBC, its Mad Money host Jim Cramer and business media in general were "completely out of line."
- Mortgage applications jumped last week, as low interest rates fueled refinancing activity. The Mortgage Bankers Association said Wednesday its weekly application index climbed 21.2% for the week ended March 13. The index came in at 876.9, up from 723.4 a week earlier. On an unadjusted basis, the index rose 20.7% compared with the previous week, the trade group said. The average rate for traditional, 30-year fixed-rate mortgages dipped to 4.89% from 4.96% a week earlier, according to the MBA report.
CNNMoney.com:
- As part of its iPhone 3.0 presentation Tuesday, Apple (AAPL) offered some new statistics on how the iPhone App Store is growing — including its first update since Jan. 16 of the number of App Store downloads. It also introduced some features that could change the nature of the store — and not necessarily for the better. According to Greg Joswiak, VP of iPhone marketing, users have now downloaded more than 800 million applications from the store — a 60% increase in two months.
Reuters:
- Debt-free Panera Bread Co (PNRA) is in expansion mode as many of its rivals shrink and is exploring the idea of embedding its bakery-cafes in retail stores, but the company has no plans to go on a buying spree. Panera plans to open 80 to 90 restaurants this year, taking advantage of its reputation for high-end affordability and a weak economy that has created excess retail space.
- Traders betting that shares of Citigroup (C) and other beaten down financial stocks will fall are finding it extremely difficult to borrow shares needed to make that bet, market participants said on Wednesday.
- Senate Banking Committee Chairman Chris Dodd said on Wednesday he was responsible for a legislative loophole that let AIG (AIG) pay executives $165 million in bonuses, but that he acted at the behest of the Obama administration. "We wrote the language in the bill to deal with bonuses, golden parachutes, excessive compensation -- executive compensation, that was adopted unanimously by the United States Senate in the stimulus bill," Dodd, a Connecticut Democrat, told CNN.
Financial Times:
Airlines in the Asia-Pacific region are at a “tipping point”. They are only weeks away from grounding as much as 10 per cent of their aircraft as they grapple with weak revenues, falling load factors and excess capacity. The prediction from the Centre for Asia Pacific Aviation, a consultancy, comes a day after Singapore Airlines recorded one of its worst monthly falls in passenger loads. These dropped more than 20 per cent or by nearly 300,000 passengers in February compared with the same time last year. “This region is very, very close to the tipping point, where the network carriers have to move away from taking reactionary or precautionary measures to taking fundamental actions that are different from what they have ever done before,” he said. Mr Harbison estimated that airlines in the region might ground as much as 10 per cent of their aircraft in the “coming weeks”. However, “if things don’t improve by the second half, we could be looking at a figure considerably more than that”.
- Harvey McGrath, the new chairman of Prudential , has defended the lending of shares to hedge funds by insurers, a practice that underpins short-selling and which has come under fire from some rivals. “My view, from first principles, is . . . being able to short, just as [being able to] go long, is an important part of the market’s function,” he said. His comments take place after rival Aviva said it was considering ending stock lending and had sounded out Europe’s biggest insurers about curbing the practice after blaming hedge funds for a slide in its share price.
Sueddeutsche Zeitung:
- German Finance Minister Peer Steinbrueck considers it possible that Germany
Philstar.com:
- The Development Bank of Singapore (DBS) expects the Philippine economy to fall close to recession due to falling exports and declining remittances from overseas Filipino workers (OFWs). In its second quarter outlook, DBS retained its economic growth forecast on the Philippines of 2.5 percent, the slowest pace since the dot-com bubble burst in 2001.
The West Australian:
- Container volumes at Fremantle port fell 13% in February, prompting a warning of job losses at the harbor that services Perth New motor vehicle imports have dropped 15% this year and steel imports are expected to decline, citing Fremantle Ports CEO Chris Leatt-Hayter.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (NKE), target $61.
- Reiterated Buy on (ORCL), target $21.
Night Trading
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/EPS Estimate
- (FDX)/.46
- (BKS)/1.48
- (ROST)/.76
- (DFS)/-.02
- (PALM)/-.57
Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 655K versus 654K the prior week.
- Continuing Claims are estimated to rise to 5323K versus 5317K prior.
10:00 am EST
- Leading Indicators for February are estimated to fall .6% versus a .4% rise in January.
- Philly Fed for March is estimated to rise to -39.0 versus -41.3 in February.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology 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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