Late-Night Headlines
Bloomberg:
- An oil-shale formation in western Colorado may hold an estimated 1.53 trillion barrels of oil, 50 percent more than the last assessment, the U.S. Geological Survey said. The amount of oil in the Piceance Basin was last assessed in 1989, the survey said in an e-mailed release. There is no economically viable method of extracting it, the agency said. “The USGS scientific report shows significant quantities of oil locked up in the shale rocks of the Piceance Basin,” Interior Secretary Ken Salazar, a former Democratic senator from Colorado, said in a statement. “I believe it demonstrates the need for our continued research and development efforts.” The majority of the increase in potential oil was due to assessments of new geographic areas and subsurface zones that had too little data for previous estimates, the agency said. Salazar on Feb. 25 said he was withdrawing leases issued during the Bush administration to extract oil from shale formations on federal land. The technology still requires answers about water use, commercial viability and the environmental impact of development, Salazar said.
- Research In Motion Ltd.(RIMM), the maker of the BlackBerry phone, forecast first-quarter profit that beat analysts’ estimates as sales of new models including the Storm and Bold increased. The shares surged 23 percent in late trading after RIM said profit will be 88 cents to 97 cents a share in the period ending May 30, compared with the 82-cent average of estimates compiled by Bloomberg. Sales will climb to as much as $3.5 billion, RIM said today in a statement. That also topped estimates.
- The Markit iTraxx Australia index was quoted 12 basis points lower at 343 basis points as of 10:14 am in Sydney
- Supermarket prices for 16 basic foods fell for a second straight quarter, led by declines in milk, cheese, eggs and vegetable oil, the American Farm Bureau Federation said. The average cost of items purchased by a typical consumer each week fell 5.6% to $47.41 in the first quarter from three months earlier, the group said. The cost of a pound of shredded cheddar cheese fell 14% to $4.24 in the first quarter from the previous three months. Milk fell 18% to $3.15 a gallon and a 32-ounce bottle of vegetable oil dropped 12% to $2.79, the farm group said. The cost of a dozen eggs slid 16% to $1.50.
- Britain wants an agreement from the Group of 20 nations to improve the way the International Monetary Fund uses its cash, including freeing up money for lending by selling gold reserves, International Development Secretary Douglas Alexander said. “Among the measures we hope we can affect is the commitment to provide more and better funds for the IMF and World Bank including by using profits from the sale of IMF gold reserves,” Alexander said at the Group of 20 nations summit in London today. “There have already been conversations with the South Africans and others in terms of whether the gold market can bear a phased and appropriate sale in a way that makes sense commercially.”
- Crude oil fell, paring yesterday’s 8.8 percent rally, after the head of the International Energy Agency said the group is likely to cut its energy demand forecast on declining economic growth projections. There is a “high probability” of a downward revision in the IEA’s next monthly report, due on April 10, Executive Director Nobuo Tanaka said yesterday in an interview with Bloomberg Television. “There’s nothing bullish in the fundamentals in the near future,” said Raymond Carbone, president of Paramount Options Inc. and a Nymex trader. He said oil gained “on hope” yesterday as the G-20 met. U.S. crude supplies climbed 2.84 million barrels in the week ended March 27 to the highest since July 1993, the Energy Department reported April 1. Oil prices “have bottomed out now and we hope they will improve, even though fundamentals are really the same,” OPEC Secretary-General Abdalla El-Badri said yesterday before the Paris oil conference.
- Wells Fargo & Co.(WFC), the second- biggest U.S. home lender, is planning to open a unit that will provide funding to independent mortgage bankers, according to two people familiar with the matter. The bank is telling lenders it may spend as much as $4 billion on a so-called warehouse-lending unit, said David Lykken of Mortgage Banking Solutions. Wells Fargo spokeswoman Susan Stanley declined to comment. “There’s such pent-up demand,” Lykken said today in an interview from Austin, Texas. “Wells Fargo is going to go after it in a big way.” Lykken said he works with clients that will be funded by the San Francisco-based bank.
- The Dow Jones Transportation Average of airlines, trucking companies and railroads surged as investors speculated that the $1 trillion of assistance pledged by world leaders will spur economic growth. The index created by Wall Street Journal co-founder Charles Dow in 1884 rose 7.9 percent, bringing its rally since March 9 to 38 percent. The measure has now soared at least 7.8 percent three times in the past two weeks, something it hadn’t done since August 1932, according to data compiled by Bloomberg. “We’re seeing renewed optimism about growth prospects across the board,” said Marvin Barth, chief investment strategist at Santa Monica, California-based Tennenbaum Capital Partners LLC, which manages $5 billion. “You could see more trade and more pressure on the transportation system.” YRC Worldwide Inc., JetBlue Airways Corp., Union Pacific Corp. jumped more than 8.7 percent as all 20 stocks in the transportation index advanced more than 4 percent.
- Gary Stern, the Federal Reserve’s longest-serving policy maker and an outspoken critic of bank bailouts, will retire from the central bank within months. Stern, 64, has led the Federal Reserve Bank of Minneapolis since 1985 and is the only member of the Federal Open Market Committee to serve with three central-bank chairmen: Ben S. Bernanke, Alan Greenspan, and Paul Volcker.
- The U.S. Senate rejected a proposal by President Barack Obama to finance an overhaul of the nation’s health-care system by limiting the ability of the well-to-do to take tax deductions for charitable contributions. The chamber unanimously approved an amendment to a pending budget plan that rejects the proposal to limit the size of itemized deductions that can be taken by those earning more than $250,000. Obama proposed using the estimated $318 billion such a change would generate to help finance a health-care overhaul, which he says will cost at least $630 billion. Lawmakers said they feared the effect of such a tax change on charities. “The Senate sent a clear message to the president,” said Senator Bob Bennett, a Utah Republican who sponsored the amendment. “Charities benefit greatly from the donations made by individuals in this income bracket, and raising taxes on these contributions would be a disservice to Americans and the millions of charities across the country.”
- The European Central Bank is facing a day of reckoning in its response to Europe’s worst recession since World War II. After months of delay and internal debate, President Jean- Claude Trichet said yesterday the ECB will announce its decision on new policy tools next month as interest rates edge toward zero. The danger is that the economy will slip further into recession the longer the bank delays. “By again buying time, the ECB risks falling further behind the curve,” said Carsten Brzeski, an economist at ING Groep in Brussels. “You cannot buy time forever.”
Wall Street Journal:
- Even before he took office six years ago, former Illinois Gov. Rod Blagojevich, his brother and a circle of associates conspired to use the governor's office to enrich themselves at the expense of taxpayers and "honest government," a federal grand jury indictment charged Thursday. The 75-page, 19-count indictment charged Mr. Blagojevich, 52 years old, Robert Blagojevich, 53, two of the ex-governor's former aides and two business associates with a variety of felonies, including allegations the former governor schemed to auction off the U.S. Senate seat vacated by President Barack Obama. Prosecutors say the six men named in the indictment sought to profit from the governor's authority to award money and jobs in construction, legal work, consulting and investments. Mr. Blagojevich, a Democrat, was charged with 16 felony counts, among them: racketeering conspiracy, wire fraud, extortion conspiracy and lying to federal agents. He has denied any wrongdoing. On Thursday Mr. Blagojevich was vacationing with his family in Florida and released this statement: "I'm saddened and hurt but I am not surprised by the indictment. I am innocent. I now will fight in the courts to clear my name. I would ask the good people of Illinois to wait for the trial and afford me the presumption of innocence that they would give to all their friends and neighbors."
- Venezuelan President Hugo Chávez moved to jail a prominent opposition figure for a second time in recent weeks -- an apparent bid to tighten his grip on power amid a sharp downturn in economic growth. Some observers say the moves illustrate how Mr. Chávez is using government institutions to punish political opponents. "All available information suggests that this is selective prosecution motivated by political reasons," says Jose Miguel Vivanco, the executive director of Human Rights Watch's Americas program. Mr. Vivanco was expelled from Venezuela at gunpoint last year after releasing a report critical of Mr. Chávez.
- Daniel Zwirn, the hedge-fund manager whose firm has been hobbled by a federal probe and client discontent, stands to relinquish substantial control of nearly $3 billion in assets within days. A deal to transfer management of his holdings could mark a victory for Mr. Zwirn's investors, some of whom urged him to cede control after the Securities and Exchange Commission opened an investigation into his firm and he froze withdrawals.
- Citigroup Inc.'s (C) Smith Barney retail brokerage recently recruited financial advisers from Merrill Lynch Wealth Management, a unit of Bank of America Corp. (BAC), and UBS AG (UBS).
- Six Democratic and Republican senators sent a letter this week to Securities and Exchange Commission Chairman Mary Schapiro saying they will take legislative action if the SEC fails to address "abusive" naked short-selling. In a two page letter, Sens. Carl Levin, D-Mich., Arlen Specter, R-Pa., Saxby Chambliss, R-Ga., Jon Tester, D-Mont., Ted Kaufman, D-Del., and Johnny Isakson, R-Ga., said they were troubled by the findings in the SEC inspector general's recent report which found that the enforcement division ...
- The Treasury Department has cut the amount of cash it intends to invest in two key programs, part of a shuffling of resources designed to give the government wriggle room in case it needs to launch fresh bailouts. The biggest changes are to the government's program to boost consumer lending, the Term Asset-Backed Securities Loan Facility, or TALF. Initially, the Treasury said it planned to invest $100 billion from its bailout funds. Now, it will contribute $55 billion. The Treasury's program to provide capital infusions into the nation's banks has also shrunk, to $218 billion from $250 billion. The changes are designed to free up more cash in the government's $700 billion bailout fund, in case of emergencies. The Troubled Asset Relief Program is running low and lawmakers say there is almost no chance Congress will authorize more bailout money in the near future. The cut in the TALF investment could be reversed if Congress signs off on more bailout spending.
- The robust rise of CEO pay reversed in 2008 as shrinking profits led to smaller bonuses. The median salaries and bonuses for the chief executives of 200 big U.S. companies fell 8.5% to $2.24 million, according to an analysis for The Wall Street Journal by Hay Group, a management consulting firm. The analysis examined proxy statements for companies with more than $5 billion in annual revenue. Including the value of stock, stock options and other long-term incentives, total direct compensation for the CEOs dropped 3.4% to a median of $7.56 million. The decline was the first in seven years and only the second drop since the Journal began tracking CEO pay in 1989.
MarketWatch.com: Mitsubishi Motors Corp. is planning to double production capacity for the i MiEV electric vehicle to 20,000 units a year by 2011, according to a published report.
CNBC.com:
When it comes to job losses in this recession, March will be the cruelest month, while April may be the beginning of the end of the misery. “It almost can’t get any worse,” says economist David Jones of DMJ Advisors.
- Worth tells us he’s closely watching the 150-day moving average on the S&P which he calls the smoothing mechanism. “When the smoothing mechanism flattens by definition the market will be in the throws of a bearish to bullish reversal.” And he thinks this one technical indicator could speak volumes to investors. “In fact of the last 11 bear markets of the post-War period if you just waited for that alone you would have been at or near the lows when you committed capital.” So now the trillion dollar question. When will the 150-day moving average flatten on the S&P? According to Worth, not long from now. Looking at patterns he concludes, “the moving average should go flat in the next 3-4 weeks. “ In other words the S&P could begin a bearish to bullish reversal as soon as early May!
NY Times:
- Banks Face Big Losses From Bets on Chinese Realty. Back in the good old days — early 2007 — bankers from Merrill Lynch, Deutsche Bank and other financial giants placed their bets on a 48-year-old property tycoon who was supposed to be China’s next billionaire. They lent his company $400 million, encouraged him to acquire large tracts of land and in early 2008 promoted a proposed $2.1 billion public stock offering by the company, the Evergrande Real Estate Group, in Hong Kong. One year later, China’s housing market has collapsed, Evergrande is mired in debt and the Wall Street bankers are facing huge losses because the company never sold stock to the public. Now, analysts say, Evergrande has become a symbol of China’s go-go era of investing, when international bankers, private equity deal makers and hedge fund managers rushed here hoping to cash in on the world’s biggest building boom. By making short-term and sometimes hasty bets on China’s property market, analysts say, some of the world’s biggest financial institutions may have lost as much as $10 billion. While the scale of the property downturn is still unclear — sales have rebounded slightly after falling more than 50 percent in some big cities — investment in big property projects has stalled. To earn big returns, many global investors used complex offshore investment vehicles, like convertible bonds and preferred equity, which gave them tax advantages and allowed them to more easily bypass Beijing’s strict controls on investing in Chinese companies. Often the investments were routed through places like the Cayman Islands or the British Virgin Islands. “Many developers are now or will soon be in default,” says Jack Rodman, a specialist in distressed property who is a senior adviser for King & Wood, the big Chinese law firm, trying to help creditors manage offshore real estate deals. “Many deals were syndicated, so there are huge creditor meetings going on.” Mr. Rodman says that because so many of the deals were made offshore, unwinding them is proving difficult. The creditors in many of these deals are big United States-based private equity funds, hedge funds and nearly all the major Wall Street banks.
- During the last eight years, the Air Force has twice botched efforts to award one of the Pentagon’s richest contracts, a $35 billion order for tankers that can refuel warplanes in midair. But now, as the Pentagon prepares to reopen the competition, some leading lawmakers and military analysts are suggesting a seemingly heretical notion: split the giant contract between the two rivals — Boeing and a joint venture involving Northrop Grumman and the European company that makes the Airbus planes.
Reuters:
- Gilead Sciences Inc(GILD) said on Thursday its experimental drug to treat patients whose high blood pressure is not controlled by other medicines met both the primary goals of a late-stage study, sending its shares 5 percent higher. The drug, darusentan, proved statistically significantly superior to placebo at all three doses tested in goals of change from baseline at 14 weeks in trough sitting systolic blood pressure (SBP) and trough sitting diastolic blood pressure (DBP), Gilead said. Darusentan is being tested for the treatment of resistant hypertension in patients who failed to achieve blood pressure goals, while taking a three-drug regimen that includes a diuretic.
Financial Times:
Banks following international accounting rules will not get the break awarded to their US rivals, the international standard setter announced Thursday. The US Financial Accounting Standards Board agreed on a rushed change to its rules that relaxes “fair value” accounting by allowing banks more freedom to use their own valuation models, rather than current market prices, for assets where markets have become illiquid. The rule change is expected to boost first-quarter profits of many banks by allowing managers to recalculate the value of some troubled assets. But the International Accounting Standards Board, which sets rules for more than 100 countries including the European Union, has said that it would instead push forward with a full, faster review of how it accounts for financial instruments. A draft proposal is expected in less than six months.
- President Barack Obama will this weekend head to the 60th anniversary summit of Nato, held symbolically on the borders of Germany and France. His visit comes a week after the 10th anniversary of the Nato assault on the former Yugoslavia over Kosovo. The week also marks the re-integration of France into the Nato military command that it left 43 years ago. But amid all these military anniversaries what should Mr Obama’s message be for the Europeans and what will he get in response? He should ask the Europeans to do more in terms of security in return for a grand bargain – the US will remain connected to Europe’s security and prosperity.
- US banks that have received government aid, including Citigroup , Goldman Sachs , Morgan Stanley and JPMorgan Chase , are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system. The plans proved controversial, with critics charging that the government’s public-private partnership - which provide generous loans to investors - are intended to help banks sell, rather than acquire, troubled securities and loans. Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls”. Mr Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.” Public opinion may not tolerate the idea of banks selling each other their bad assets. Critics say that would leave the same amount of toxic assets in the system as before, but with the government now liable for most of the losses through its provision of non-recourse loans. Goldman and Morgan Stanley have large fund management units and have pledged to increase investments in distressed assets.
Nikkan Kogyo:
- Sharp Corp., Japan Japan
Korea Economic Daily:
- Dubai Nakheel PJSC, the Dubai Samsung C&T Corp., South Korea
The Australian:
- Chinese spies have directly targeted Kevin Rudd, repeatedly attempting to infiltrate prime ministerial email and mobile phone communications. The Australian understands Mr Rudd and his traveling party were under constant cyber attack during his latest trip to China, in August last year, with authorities trying to access the laptop computers and mobile phones used by the Australians. The blatant nature of Beijing's electronic espionage is understood to have alarmed the Rudd Government and led to a further tightening of communications security procedures for senior government figures traveling to China. Intelligence sources said Beijing had also made repeated attempts to break into government and business IT networks, as well as foreign embassies based in Canberra.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (MON), target $98.
- Reiterated Buy on (GILD), target $56.
Canaccord Adams:
- Online search trends started to improve in March. Upgraded (GOOG), (VCLK) and (IAC) to Buy.
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
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Earnings of Note
Company/EPS Estimate
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for March is estimated at -660K versus -651K in February.
- The Unemployment Rate for March is estimated to rise to 8.5% versus 8.1% in February.
- Average Hourly Earnings for March are estimated to rise .2% versus a .2% gain in February.
10:00 am EST
- ISM Non-Manufacturing for March is estimated to rise to 42.0 versus 41.6 in February.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and automaker stocks in the region. I expect US
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