Today's Headlines

Bloomberg:

- U.S. stocks rose, extending the market’s best monthly gain since 1987, on better-than-estimated earnings at Best Buy Co.(BBY) and ConAgra Foods Inc.(CAG) and prospects for lower labor costs at General Motors Corp.

- Treasuries rose as the government’s record $24 billion sale of seven-year notes drew a yield of 2.384 percent. The yield was close to the 2.385 percent forecast in a Bloomberg News survey of 10 bond-trading firms. Treasuries rose before the auction, the third in the government’s record $98 billion sale of notes this week. The benchmark 10-year note’s yield fell four basis points, or 0.04 percentage point, to 2.77 percent at 1:03 p.m. in New York, according to BGCantor Market Data.

- The U.S. 30-year fixed mortgage rate fell to 4.85 percent, the lowest on record, on a government plan to increase purchases of mortgage-backed bonds and buy as much as $300 billion of Treasuries. The average rate is the lowest in the Freddie Mac weekly survey dating to 1971, the McLean, Virginia-based mortgage buyer said today in a statement. The rate fell from 4.98 percent a week earlier, Freddie Mac said. Housing prices “aren’t that far from where we need to be if the economy stabilizes and starts growing again,” Susan Wachter, professor of real estate finance at the University of Pennsylvania’s Wharton School, said in a Bloomberg Radio interview on March 24. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan soared 32 percent to 1,159.4 in the week ended March 20 from 876.9 the prior week. The group’s refinancing gauge surged 42 percent and its purchase index gained 4.2 percent.

- The cost to protect North American corporate debt from default using a benchmark credit-default swaps index fell for a fourth day. Credit-default swaps on the Markit CDX North America Investment-Grade Index Series 12, linked to 125 companies in the US and Canada, declined 3.5 basis points to 178.25 basis points as of 9:07 am in NY, according to Barclays Capital. The index has fallen more than 20 basis points since March 23.

- GameStop Corp.(GME), the world’s largest video-game retailer, said fourth-quarter profit rose 22 percent on holiday sales of “Guitar Hero” and Nintendo Co.’s Wii console. Net income increased to $232.3 million, or $1.39 a share, from $189.8 million, or $1.14, a year earlier, the Grapevine, Texas-based company said today in a statement distributed by Business Wire.

- Best Buy Co.(BBY), the largest U.S. electronics retailer, posted fourth-quarter profit that fell less than analysts estimated, helped by mobile-phone sales in Europe. The stock climbed 13 percent in New York trading. Sales rose 9.7 percent to $14.7 billion in the three months ended Feb. 28, the Richfield, Minnesota-based company said today in a statement.

- China, the world’s second-largest energy user, will face a power surplus in most regions this year as the slowing economy curbs demand, the nation’s top economic planner said. Power generators’ utilization rate will drop further this year, the National Development and Reform Commission said in a statement on its Web site today.

- American International Group Inc. will be subpoenaed today by New York Attorney General Andrew Cuomo for its credit-default swap contracts, according to a person familiar with the investigation. AIG’s Financial Products, the unit that sold credit-default swaps blamed for crippling the company, has been under fire after paying out $165 million in retention bonuses earlier this month while taking taxpayer bailouts of $182.5 billion. Cuomo started probing the credit-default swap market in September to see whether it was manipulated by short sellers to spread false rumors about financial companies.

- Lawmakers called for a federal investigation into $50 billion in payments to banks after the government bailed out American International Group Inc. “We would like to know if the AIG counterparty payments, as made, were in the best interests of the taxpayers,” said 27 members of Congress. Banks that bought credit-default swaps from AIG got $22.4 billion in collateral and $27.1 billion in payments from a U.S. entity to retire the derivatives, the insurer said earlier this month. Goldman Sachs Group Inc., Deutsche Bank AG., and Societe Generale SA were among the largest recipients.

- U.S. Securities and Exchange Commission Chairman Mary Schapiro said she will impose new rules on money managers to safeguard client holdings after Bernard Madoff’s $65 billion fraud shattered investor confidence. The SEC will propose that all investment advisers who have custody of customer assets undergo annual audits that are “unannounced,” Schapiro told members of the Senate Banking Committee today. Money managers may also be subject to compliance audits by professional examiners to make sure they are adhering to securities laws, she said.

- President Barack Obama said he plans to outline his strategy for the automobile industry and suggested he is open to providing automakers with more aid. “We need to preserve a U.S. auto industry,” Obama said today as he answered questions at a White House Internet town- hall event. “We will provide them with some help” even though “it’s not popular” right now to assist automakers. The “current economic model of the U.S. auto industry is unsustainable,” he said.

- US stocks have their best intraday returns starting at 2 pm in NY as institutional money managers begin buying, according to an analysis by Bespoke Investment Group LLC. “This could be a sign that the institutional money has been doing a lot of buying,” Bespoke co-founder Justin Walters wrote. “It’s a common belief on Wall Street that the institutional money(smart money) trades at the end of the day, while the individual money(dumb money) trades at the beginning of the day.”

Wall Street Journal:

- The volume of international air cargo fell in February at a similar rate as it did in the previous two months, offering faint hope that freight traffic, a key economic indicator, is stabilizing, albeit at a low level.

- The home electricity meter is getting a high-tech makeover, and chip makers stand to benefit. With a shove from the Obama Administration's stimulus package, utilities are replacing rusty electricity meters in favor of digital "smart meters" as part of a much broader update of U.S. energy infrastructure. The update of meters alone could represent billions in revenue for chip makers over the next decade, though how quickly utilities will roll out the new products remains unclear. Analog chip companies in particular - such as TI, Analog Devices Inc. (ADI), STMicronelectronics NV (STM), Freescale Semiconductor Inc. and others - will see most of the gains as the market expands. Smart meters use communications chips such as short distance radios, measurement devices, signal processors and microcontrollers to coordinate the different functions.

- Shares of solar companies soared Thursday following a media report that the Chinese government is open to supporting the local development of solar energy in China. Asian technology newspaper DigiTimes said in an article Thursday that China hasn't yet designed a program or set a schedule for solar energy subsidies as costs of solar power generation are still too high. DigiTimes attributed the comments made at a Taiwan-China photovoltaic industry convention to officials from the Chinese Department of Renewable Energy.

- New life is being pumped into the beaten-down hedge fund industry as laid-off workers from the banking sector, and others looking for a fresh start, try their hand at lead-managing other people's money. This new batch of fund managers is taking advantage of a view held by many that being new to the field can be a good thing. Investors see them as being untainted by the problems that plagued the hedge fund industry in 2008 - everything from negative returns to corruption scandals like the one involving Bernard Madoff.

- The Senate Budget Committee began debating amendments to the Senate's budget framework for next fiscal year as tensions persist between congressional Democrats and President Barack Obama on his $3.6 trillion budget plan. Wednesday, Mr. Obama urged Democrats to maintain party unity and preserve his fiscal priorities, and congressional leaders are largely doing so. But important differences are emerging over issues such as climate change and health care, as well as spending.

- North Korea has mounted a rocket on a launchpad on its northeast coast, U.S. officials said, putting Pyongyang well on track for a launch the U.S. and South Korea warned Thursday would be a major provocation with serious consequences.

CNBC:

- Schork Oil Outlook: The Bulls Will Run Out of Gas.

- Business groups and a senior Democratic lawmaker are pressuring the U.S. auditing watchdog to get in line with likely changes to a controversial mark-to-market accounting rule that has forced banks to record billions of dollars of writedowns. The Financial Accounting Standards Board, which sets U.S. accounting rules, has already bowed to congressional demands and proposed giving banks more flexibility to value their toxic assets in the current frozen markets. Now business groups are turning up the heat on the Public Company Accounting Oversight Board, the Washington D.C.-based audit watchdog, to do its part to be more flexible in its application of the accounting rule. "We don't want to get into a situation where one-half of financial reporting world is making a lot of changes and the other is not," said Thomas Quaadman, executive director of reporting policy at the U.S. Chamber of Commerce, the largest business lobbying group. "If (the PCAOB) is not on the same wavelength, it will all be for naught," he said. If the PCAOB does not act expeditiously, Congress may get involved as it did with FASB.

- Private equity risk appetite is beginning to build after months of extreme caution, say industry players, who see opportunities even as the economic climate appears bleak. "One of the truths about private equity is the best time to invest is during the downturn," said Simon Walker, chief executive of the British Venture Capital Association (BCVA), at the Reuters Hedge Funds and Private Equity Summit in London. The views come a day after Larry Kantor, head of research at Barclays Capital, said it was time for investors to be more aggressive. "Expectations have been driven down to extremes, and the beginnings of a global economic recovery are evident," Kantor said.

Chicagotribune.com:
- Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator. One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort. As gatekeeper to Obama, Emanuel now plays a critical role in addressing the nation's mortgage woes and fulfilling the administration's pledge to impose responsibility on the financial world. Emanuel's Freddie Mac involvement has been a prominent point on his political résumé, and his healthy payday from the firm has been no secret either. What is less known, however, is how little he apparently did for his money and how he benefited from the kind of cozy ties between Washington and Wall Street that have fueled the nation's current economic mess.

NY Times:

- Executives at Goldman Sachs(GS) made it clear that they wanted to give back the government aid the firm had received. A bill winding its way through Congress that would impose a 90 percent tax on bonuses for banks that receive government assistance reinforces that desire. So let’s assume that regulators give Goldman the go-ahead. The question would be, would the firm want to replenish some of the money by selling new stock to the public? But Goldman still needs to reckon with Warren Buffett. Berkshire Hathaway, led by Mr. Buffett, injected $5 billion into Goldman last September in return for preferred shares. That, combined with a common stock offering, helped bolster Goldman’s capital in the wake of the Lehman Brothers bankruptcy. But Mr. Buffett’s involvement came with a condition that could qualify him for some kind of compensation.

- Gov. David A. Paterson and New York legislative leaders have reached an agreement to dismantle much of what remains of the state’s strict 1970s-era drug laws, once among the toughest in the nation. The deal would repeal many of the mandatory minimum prison sentences now in place for lower-level drug felons, giving judges the authority to send first-time nonviolent offenders to treatment instead of prison. The plan would also expand drug treatment programs and widen the reach of drug courts at a cost of at least $50 million.

- Tempers are flaring across Europe as the economic pain deepens and more people lose their jobs.

- After several gloomy months, experts say that the stimulus package is beginning — just beginning — to revive interest in wind and solar power.

Forbes.com:

- Wilbur Ross, Mortgage King? The housing market’s still sliding, but he’s doubling down on a massive subprime bet – and picking fights along the way.

Fox Business:

- Pepco Holdings, Inc. (NYSE:POM) today announced contracts to purchase the first of what could be nearly 2 million smart meters for installation in the homes and businesses of customers in three states and the District of Columbia over the next five years. The new digital meters are a critical component of PHI's plan to build a smart grid network that could eventually serve the company's 1.9 million customers in Delaware, the District of Columbia, Maryland and New Jersey.

AppleInsider:

- An interesting but at times erratic patent filing from Apple published for the first time this week describes a proprietary in-car navigation system focused on maintaining driver safety while a vehicle is in motion. The 11-page filing starts off by noting that the use of a conventional navigation system in a moving vehicle often raises safety concerns, particularly if the driver of the vehicle is attempting to operate the navigation system while simultaneously operating the vehicle.Apple's solution to the problem calls for a smarter touchscreen-based navigation system that may be either a self-mounted handheld device like an iPhone or one that's hardwired into the car. Either could tie into various forms of sensors and I/O devices such as a speaker and a microphone to facilitate voice-enabled functionalities, such as navigation, stereo, and phone functions. A loud speaker could also be included to facilitate hands-free voice command functionalities, such as voice activated entry for requesting driving directions.

NewTeeVee:

- We’ve heard from multiple sources that RIM is planning to announce a full-episode television service for BlackBerry users as early as next week at CTIA. Here’s what we’ve heard so far:

The NY Observer:

- The New York Times is expected to make an announcement later today that editors will be taking a pay cut, and members of the Times’ Guild—who makes up the majority of the reporters in the newsroom—will be asked to do the same. For the time being, there aren’t expected to be layoffs.

Politico:

- House Republicans have begun unveiling detailed alternatives to President Barack Obama’s policies — a concerted effort to push back against Democratic efforts to label them “the Party of No.” On Wednesday, it was a housing plan. Thursday, it will be a big, TV-friendly stack of budget blueprints, “The Republican Road to Recovery.” That’s to match the president’s own platitudinous budget title, “A New Era of Responsibility.” The House Republicans’ budget document, provided to POLITICO ahead of its release, makes sure no one can miss the point: Each chapter begins “The Republican Plan,” and each section is divided into “The President’s Budget” and “Republicans’ Solution.”

Moneynews.com:

- George Soros has no worries about the global recession. He and a handful of others in the arcane and virtually unregulated world of hedge funds have made a bundle off the global recession. “I'm having a very good crisis,” Soros says, quoted by the U.K. Daily Mail. As the Obama administration sets its sets on reining in the industry, Soros and others literally made billions by taking contrarian bets against stocks. As stocks fell in half, pension funds collapsed and millions of savers watched their 401(k)s founder, Soros made $1.1 billion last year. “It is, in a way, the culminating point of my life’s work,” Soros told The Australian.

Reuters:
- China's sparring with the West has inspired its own angry best-seller, lashing foreign targets and the country's own elite with scorn popular with some readers but worrying for a government wanting to tether nationalism. "China is Unhappy" has sold quickly since its publication earlier this month, but some state-run newspapers have fretted over its scathing assaults on the United States and the West -- blasts that also spatter doubt on Beijing's own policies. Chinese President Hu Jintao goes to London next week for a G20 summit aimed at steadying the battered global economy. But Washington has behaved no better than a crime gang boss, write the five authors of this polemic. The American people "were not entirely duped. They just wanted big houses without working for them," he adds. But the book, which is in the Chinese language, also lacerates China's own policies, accusing officials of incompetence and stifling conservatism. And the book's assault on these home targets may help explain the prominent criticism of it that has spread in official media. "In fact, a key focus of the book is domestic problems," Huang Jisu, one of the authors, told Reuters.

- IBM's (IBM) talks to acquire Sun Microsystems Inc (JAVA) are continuing and may extend beyond next week, according to a person with knowledge of the matter. The source, who requested anonimity as the person was not authorized to speak about the talks, said IBM was still examining Sun's business as part of its due diligence process.

- The U.S. recession could end around mid-year, giving way to a subdued recovery before "healthy" growth kicks in from mid-2010, Gary Stern, Minneapolis Fed President, said on Thursday. Stern, in a speech to the Economic Club of Minnesota, said the threat of deflation resulting from the downturn in global economic activity should fade as the economy recovers. "I am guardedly optimistic that many pieces are now in place to contribute to improvement in financial market conditions and in business activity," Stern said. "There is reason to think that improvement is not too far off."

- When small U.S. defense subcontractor Axsys Technologies (AXYS) put itself up for sale this month, it sparked talk of another round of consolidation in the defense technology market. Shifting priorities in defense spending toward intelligence and surveillance, and away from big-ticket weapons programs, have resulted in cash-rich defense contractors such as Lockheed Martin Corp (LMT), Boeing Co (BA) and Northrop Grumman Corp (NOC) scouting for smaller players with niche technologies. Industry experts said companies such as American Science and Engineering Inc (ASEI), which makes X-ray detection systems, and Comtech Telecommunications Corp (CMTL), known for its communications products, are attractive targets. Other well-placed companies are Argon ST (STST) and Applied Signal Technology Inc (APSG), the only listed firms that sell signal intelligence gear.

- Barclays Capital on Thursday named banks that may benefit the most and those who may gain the least from the slew of recent government actions to prop up the financial markets. According to Barclays estimates, Citigroup Inc (C) and JPMorgan Chase & Co (JPM) are among banks that will emerge the top winners, while regional banks, like Fifth Third Bancorp (FITB), may see the least benefit.

Financial Times:
- The US has told its Nato partners that funds from individuals in Gulf states such as Saudi Arabia now rival drug money as a source of financing for Taliban insurgents in Afghanistan. The US launched a high-profile push to reduce Gulf funding for the Taliban, al-Qaeda and other militant groups operating out of Afghanistan in the immediate aftermath of the September 11 attacks in 2001. As a result, in recent years insurgent links to Afghanistan's burgeoning heroin trade have become the principal focus. But Richard Holbrooke, US special representative for Afghanistan and Pakistan, expressed fresh concerns to Nato ambassadors during a briefing this week on the US's strategic review of Afghan-Pakistan policy, which is expected to be announced tomorrow. "He said that the prime source of funding for the Taliban is not from narcotics but from private individuals in the Gulf region," said a western diplomat, without giving further details. "There is real concern about funding for extremists in the Afghanistan-Pakistan region coming from the Gulf, which we understand rivals or exceeds the money they are getting from drugs," said another diplomat, quoting estimates of $150m-$300m for insurgents' drugs cash. The US has for some time been pushing Saudi Arabia to ensure that funds raised for charities do not ultimately finance Islamist militants.

- Obama’s bank plan could rob the taxpayer. The Geithner-Summers plan, officially called the public/private investment program, is a thinly veiled attempt to transfer up to hundreds of billions of dollars of US taxpayer funds to the commercial banks, by buying toxic assets from the banks at far above their market value. It is dressed up as a market transaction but that is a fig-leaf, since the government will put in 90 per cent or more of the funds and the “price discovery” process is not genuine. It is no surprise that stock market capitalization of the banks has risen about 50 per cent from the lows of two weeks ago. Taxpayers are the losers, even as they stand on the sidelines cheering the rise of the stock market. It is their money fuelling the rally, yet the banks are the beneficiaries. The plan’s essence is to use government off-budget money to overpay for banks’ toxic assets, perhaps by a factor of two or more. This is done by creating a one-way bet for private-sector bidders for the toxic assets, then cynically calling it “private sector price discovery”.