Tuesday, December 22, 2009

Wednesday Watch

Late-Night Headlines

- Financial markets in the US have rebounded to the healthiest state since the freezing of investment funds by BNP Paribas SA in August 2007 marked the start of the credit crisis. The Bloomberg US Financial Conditions Index rose to .063 after holding below zero for the past 28 months. The gauge tracks how far indicators such as bond yield spreads, the Standard & Poor's 500 Index and Chicago Board Options Exchange Volatility Index, or VIX, stray from their averages between 1994 and June 2008.

- Micron Technology Inc.(MU), the biggest U.S. producer of computer-memory chips, reported its first profit in more than two years after memory prices rebounded. First-quarter net income was $204 million, or 23 cents a share, compared with a loss of $718 million, or 93 cents, a year earlier, Micron said. Analysts had estimated a profit of 6 cents a share on average, according to a Bloomberg survey.

- General Growth Properties Inc., the second-largest U.S. mall owner, has won approval from creditors and a federal court to restructure loans totaling $11.6 billion, according to a lawyer. The company today won confirmation from U.S. Bankruptcy Judge Allan Gropper in Manhattan of its plan to extend the maturities of seven loans at least $1.3 billion after creditors agreed to the terms.

- U.S. senators are backing Federal Reserve Chairman Ben S. Bernanke for a second term by a 3-to-1 margin, based on a count of 77 lawmakers by Bloomberg News. Bloomberg today interviewed 53 senators who aren’t on the Banking Committee, which voted 16-7 on Dec. 17 to recommend Bernanke’s nomination to the full Senate. Twenty-one lawmakers said they are inclined to vote for Bernanke, while four said they would oppose the central bank chief, giving Bernanke 37-12 support so far for a four-year term starting Feb. 1. Another 28 said they’re undecided or declined to comment.

- International Brotherhood of Teamsters President James Hoffa is asking the U.S. Securities and Exchange Commission and New York State Attorney General Andrew Cuomo to review “questionable promotion” of credit- default swaps tied to trucking company YRC Worldwide Inc. Hoffa sent letters to the regulators and members of Congress, the Teamsters said today in a statement distributed by PR Newswire. YRC, the biggest U.S. trucking company by sales, is seeking a debt-for-equity exchange to avert bankruptcy. Facing a slump in freight demand, YRC is locked in a struggle with a group of bondholders who own derivatives that would pay out if the company defaults, two people familiar with the situation told Bloomberg News last week. The deadline for the tender offer is 11:59 p.m. tomorrow in New York. “The stakes are so high and the consequences potentially so imminent that we believe it is imperative that your office begin an immediate inquiry at its earliest opportunity,” Hoffa wrote in a letter addressed to Cuomo. Goldman Sachs Group Inc., Deutsche Bank AG, TD Bank Financial Group, Barclays Capital and UBS AG “have a history of making markets in these types of derivative financial products,” Hoffa said in the letter. Last week, Hoffa wrote a letter to Goldman Sachs Chief Executive Officer Lloyd Blankfein saying the firm was creating derivatives trades that would benefit from a bankruptcy. DuVally has confirmed the bank received that letter and said in an interview on Dec. 17 that the New York-based bank was “actively exploring ways to help” YRC.

- China’s plan to give domestic companies that make innovative products an advantage in the race for government contracts amounts to raising trade barriers, the Obama administration said. China unveiled rules last month that would let companies with products accredited for “indigenous innovation” to qualify for preferences in government purchases. “The United States has since expressed serious concerns to China about this measure,” the U.S. Office of Trade Representative a report yesterday.

- President Barack Obama’s plan to move accused terrorists from the U.S. prison camp at Guantanamo Bay, Cuba, to his adopted home state of Illinois drew angry shouts and protesters at a hearing on the proposal. About 800 people today filled a high school auditorium 30 miles from the Thomson Correctional Center for the only scheduled opportunity for the public to comment in Illinois on the transfers. “I don’t think anything is a done deal,” said Lappin, who later added that it would take at least six months to prepare the state prison after a sale to the federal government is closed. Boos and shouts of “lie” filled the auditorium earlier as state officials testified about the proposal before the 12- member Illinois Commission on Government Forecasting and Accountability. “I don’t want terrorists in my backyard,” said Diane Bishop, 52, a real estate appraiser who drove two hours from her suburban Chicago home to attend the hearing. “It’s too close to home. They shouldn’t be in the United States.” Bishop was among those who waited in near freezing temperatures to enter the hearing for a discussion that began in the afternoon and appeared likely to run well into the evening. Among those held there are Khalid Sheikh Mohammed, the self-described mastermind of the Sept. 11 attacks, and other al- Qaeda operatives.

- 'New Normal' Tops 2009 List of Overused Phrases.

- The dollar traded near the highest in more than three months versus the euro before a report forecast to show new home sales rose in the U.S., adding to signs of recovery in the world’s largest economy.

- Ford Motor Co.(F), seeking to unload its unprofitable Volvo unit, will announce today that talks with Zhejiang Geely Holding Group Co. have progressed to the point where a sale is likely, a person familiar with the matter said. Ford, which named China’s Geely its “preferred bidder” for Volvo on Oct. 28, also will lay out an estimated timeline for completing the sale in a statement to be issued today, said the person, who asked not to be identified because the details aren’t public yet.

Wall Street Journal:

- Want to keep IRS auditors away? Keep your earnings under $200,000 and they won't bother you 99% of the time. IRS enforcement numbers, released Tuesday, show that returns under that amount have a 1% chance of getting audited. Returns showing income of $200,000 and above have a nearly 3% audit chance. The percentage jumps to more than 6% for returns showing earnings of $1 million or more. The percentages apply to both individual and joint returns. The number of audits jumped 11% from 2008 to 2009 for returns with earnings of $200,000 or more, but rose 30% for returns showing earnings of $1 million or more. For those under $200,000 the number of audits remained steady.

- Nordstrom Inc.(JWN), which acted earlier than many retailers on signs of the recession, appears poised to come out of the downturn faster than some of its more luxurious rivals. The 108-year-old retailer, which has always offered a wider assortment of brands and prices than higher-end competitors such as Saks Fifth Avenue and Neiman Marcus, has been working with vendors to create exclusive, but less expensive, second lines and pushing into more sales channels. "We are not out of the woods yet," says Nordstrom's president, Blake Nordstrom, the 49-year-old great-grandson of the company's late founder, John W. Nordstrom. "But we are encouraged that the trends are improving." Citigroup analyst Deborah Weinswig estimates the typical Nordstrom shopper has an annual household income of roughly $75,000, compared with $175,000 to $300,000 at Saks and Neiman Marcus. She says the $100,000-and-up consumer "is definitely [more] impacted by the wealth effect from the equity markets, and we believe that this is driving the Nordstrom customer's traffic."

- Blu-ray players, particularly those that can exploit Internet video services, are a hot item this shopping season. Shoppers are also flocking to models that cost a bit more, starting around $150, for their ability to stream content from the Internet, including movies, television shows and music from services like Netflix Inc.(NFLX), Google Inc.'s(GOOG) YouTube and Pandora Media Inc. Sales of both basic and new-wave Blu-ray players were up 53% during the week of Black Friday, according to market-research company NPD Group Inc., which obtains point-of-sale data from undisclosed electronics sellers, excluding Wal-Mart Stores Inc. Overall, the industry is expected to ship nine million Blu-ray players in 2009, up 54% from the previous year, according to research firm IDC.

- Eight months after unemployment in Elkhart County, Ind., hit 18.9% and helped make this middle America spot a symbol of the economic meltdown, people are starting to go back to work. In November the unemployment rate in the county fell to 14.5%, the lowest since November 2008, when it was 13%. A big reason for the turnaround is the rebound in the recreational-vehicle industry, which is responsible for about a quarter of the county's annual economy. As a result, Elkhart RV makers that were laying off workers last year are now hiring. The Keystone RV division of Thor Industries Inc. is one of them, adding about 500 workers in recent months.

- Investors are jostling for the chance to buy a $1.1 billion package of commercial real-estate loans extended by failed banks, as these once-toxic assets attract growing interest. More than a dozen investors, including Texas banker Andrew Beal, have submitted bids to the Federal Deposit Insurance Corp. for the portfolio of loans held by Franklin Bank, IndyMac Bank and other failed lenders, according to people familiar with the matter.

- Oil Shares for Iraqis by Ibrahim Bahr Al-Uluom. The coming election offers a choice about the future of our petro wealth.

- A last-minute addition to the Senate health-care bill that requires small construction companies to offer health coverage or pay a fine touched off a battle Tuesday with some industry groups demanding its removal. The change, offered by Sen. Jeff Merkley (D., Ore.), says construction companies should offer coverage if they have five or more employees and a payroll of $250,000 or more, or face fines of up to $750 per employee per year if the employees receive tax credits. The threshold for other types of companies is 50.

- The Price of 'History'. Harry Reid delivers a bundle of special-interest favors. Blanche Lincoln and Evan Bayh must feel like saps. The Arkansas and Indiana Democrats spent months caterwauling about this or that provision in the Senate health-care bill, then at 1 a.m. Monday they voted to speed its passage without getting so much as a lousy T-shirt. In Harry Reid's Senate, this qualifies as dereliction of duty, as the Majority Leader said himself on Monday in defense of his frantic deal-making to get 60 votes. "I don't know if there is a Senator that doesn't have something in this bill that was important to them," Mr. Reid said at a press conference that offered an unintentional commentary on modern democracy. "And if they don't have something in it important to them, then it doesn't speak well of them." James Madison, phone home.


- Upbeat for 2010. Commentary: Most newsletters on Honor Roll are bullish for new year.

- Venezuela and China gave a new boost to their thriving economic ties, signing a package of agreements that advances China strategy of locking in access to the South American country's vast oil reserves. After two days of talks in Caracas, the China National Offshore Oil Corporation (CNOOC) will help the government of President Hugo Chavez develop the Boyaca 3 oil block in the Orinoco-belt, a large heavy-crude basin in Eastern Venezuela. The move is part of Venezuela's efforts to increase oil sales to China to 1 million barrels per day from the 400,000 barrels per day it says it currently supplies. Under Chavez, Venezuela has tried to curb oil exports to the U.S. and searched for new markets.


- Stocks should make a more subdued move higher in the coming year, and the Fed is not likely to raise interest rates until at least mid-year. That is the collective view of nine major Wall Street banks, which on average forecast a 9.5 percent gain in the S&P 500 to a level of 1222 for 2010.

New York Times:

- A host of Web sites with names like Zazzle, Blurb and TasteBook are helping people quickly create one-of-a-kind products like clothing, books and jewelry. In some cases, making a custom gift can be as easy as uploading a photo or clicking a mouse. In others, the e-commerce tools shorten what would normally have taken hours of work.


- In these times of credit crisis, merchants and consumers alike know what to trust: cold, hard cash. That's one reason Cardtronics (CATM), which runs the world's largest network of ATMs, has been doing so well lately.

Business Insider:

- Due to China's one-child policy, the country faces a demographic disaster a few decades out whereby there will be far too many dependents supported by a far smaller base of working age people. This is relatively well known. Yet interestingly, this demographic disaster starts to unfold next year.

- James Altucher, one of our favorite market mavens, has just published his list of predictions for 2010. The most striking: AOL gets picked up by Microsoft.


- America could be facing a nursing shortage that will worsen exponentially as the population grows older. The problem: Baby boomers are getting older and will require more care than ever, taxing an already strained nursing system. America has had a nursing shortage for years, said Peter Buerhaus, workforce analyst at Vanderbilt University School of Nursing in Nashville, Tenn. But by 2025, the country will be facing a shortfall of 260,000 RNs, he said. "In a few short years, just under four out of 10 nurses will be over the age of 50," said Buerhaus. "They'll be retiring out in a decade. And we're not replacing these nurses even as the demand for them will be growing." That's because nursing schools are already maxed out.

- The Treasury market is delivering on investors' holiday wish-list. Like most everyone else, it wants an economic recovery. And it's got a yield curve to prove it. The closely monitored yield curve -- a key predictor of the economy -- hit a record high Tuesday, signaling that investor optimism is rising as they eye riskier (and higher yielding) assets such as stocks.

- Research in Motion (RIMM) may have a larger market share and LG may have more phones to sell, but Apple (AAPL) has the U.S.'s No. 1 mobile phone, according to a report published Tuesday by the Nielsen Co.

NY Post:

- Perhaps the most common question I'm asked about ObamaCare is: "Will I be able to buy my way out of it?" The answer is: "Not unless you're very rich." The plan before the Senate creates a set of 50 state-based insurance "exchanges" that are established as markets for health plans. Consumers must buy policies from their employers or through the exchanges — but, either way, their choice of coverage is limited to one of four basic insurance plans that the government sanctions. Private insurers will still compete to offer policies but must model their coverage on one of these four templates. In short, the Senate bill explicitly standardizes health benefits and then establishes elaborate mechanisms (including subsidies and penalties) to pay for them. Here's the rub: While these four plans vary from low- to high-cost options, the benefits offered under them are pretty much the same. The difference between the cheaper and pricier plans is mostly the amount of cost sharing (e.g., you pay less for insurance if your co-pays are higher). In effect, the plan creates a single national health-insurance policy. Consumers' only real option is to trade higher co-pays for lower premiums. But we'll all get the same package of benefits established by a series of new agencies and an "insurance czar" seated in Washington. Once the exchanges are in place, the individual market — the ability to go directly to an insurer and buy a health-care policy — will disappear.


- In an effort to harmonize its legacy payroll systems, Wells Fargo Advisors LLC will create a standard withholding tax rate of 25% across its network of 16,000 advisers. The move will take effect Jan. 1. The change could have a significant effect on the take-home pay of the firm's registered representatives. That's because brokers producing $1 million or more would have less withheld from paychecks, causing a higher tax bill later. Conversely, smaller producers, those generating $400,000 or less per year in fees and commissions, could see a whack to their monthly take-home pay.


- If hedge funds are going to enjoy a big December, they may need a big holiday bounce. Through the end of last week, the three remaining Dow Jones Hedge Fund Strategy Benchmarks aren’t exactly blowing down doors. The best of the lot, equity long/short funds, is up just 0.33% through the first three weeks of the month. The worst, event-driven, is actually down 0.14%. Merger arbitrage funds are up 0.11% during the same period. That benchmark is up 7.7% on the year; event-driven funds have returned 15% and equity long/short 3.7%.


- Chip stocks have a long way to go on their way to multi-year highs. Yes they have enjoyed a strong couple of months and can certainly pause in front of the January earnings reports. For sure this year-ending rally won't go on each and every day. It's pretty common for the ebb and flow to periodically stall, for the traders to have their day. Still, they fell so far a year and a half ago that there's still quite a long way up before you have to really worry.


- The perils of political hunting trips range from mockery — as with Sen. John Kerry’s (D-Mass.) expensive gear — to mortal danger — as in ending up on the wrong end of Dick Cheney’s 28-gauge. But Sen. Chuck Schumer (D-N.Y.) had another story in mind when he traveled recently to Nebraska, a cautionary tale told to him early in his career by an older, urban-oriented New Jersey congressman who had made the mistake of accepting a hunting invitation from a Midwestern colleague. “He shot the dog,” Schumer recalled, referring to the outcome of the Jersey pol’s inept marksmanship. Schumer did not shoot the dog. He bagged three pheasants. And six weeks later, he bagged Sen. Ben Nelson (D-Neb.), serving as key negotiator as Nelson held the fate of landmark health care legislation in the balance. While the two Senate Democrats didn’t spend their morning in a field outside Omaha talking business, the hunting trip will go down as a key, if unconventional, detour on the road to the Democrats’ most important modern legislative accomplishment.

- The outlook for the 2010 elections just grew dimmer for Democrats, with the abrupt announcement Tuesday that Rep. Parker Griffith, an Alabama freshman, was jumping to the Republican Party. While Griffith’s departure from the now 257-member Democratic Caucus will have almost no impact on the balance of power in the House, his party switch highlighted the growing unease among the Democratic Party’s most vulnerable members about the party’s ambitious national agenda and its role in contributing to the deteriorating political environment in which they must run for reelection.


- Republican candidates now have an eight-point lead over Democrats, their biggest lead of the year, in the latest edition of the Generic Congressional Ballot. The new Rasmussen Reports national telephone survey shows that 44% would vote for their district’s Republican congressional candidate while 36% would opt for his or her Democratic opponent.


- ABC News said on Tuesday its weekly gauge of U.S. consumer confidence spiked in the latest week, reaching its 2009 high for the second time this year.

- Red Hat Inc's (RHT) results beat Wall Street projections after an improving economy and reviving corporate spending fueled sales of its business software programs, sending shares up 10 percent after-hours. Its results are the latest to suggest that spending on computer technology is on the mend.

- The U.S. Senate on Tuesday set a Christmas Eve vote on final congressional approval of a bill to provide a two-month increase in the federal debt limit. The measure, passed last week by the House of Representatives, would increase the debt limit, now at $12.1 trillion, by $290 billion. Senate Democrats may approve the measure largely by themselves because most, if not all, Republicans are expected to vote against it, Republican aides said. Democrats control the Senate, 60-40.

Financial Times:

- US lawmakers are putting “undue political pressure” on regulators to tighten oversight of trading practices that had little to do with the financial crisis, while the bigger issues of systemic risk are not being adequately addressed, the head of the US’s biggest options exchange has warned. In an interview with the Financial Times, Bill Brodsky, chief executive of the Chicago Board Options Exchange, said the debate on Capitol Hill over reforming financial regulation had focused on the wrong issues.

- Cracks emerged on Tuesday in the alliance on climate change formed at the Copenhagen conference last week, with leading developing countries criticizing the resulting accord. The so-called BASIC countries – Brazil, South Africa, India and China – backed the accord in a meeting with the US on Friday night, and it was also supported by nearly all other nations at the talks, including all of the biggest emitters. But on Tuesday the Brazilian government labeled the accord “disappointing” and complained that the financial assistance it contained from rich to poor countries was insufficient. South Africa also raised objections: Buyelwa Sonjica, the environment minister, called the failure to produce a legally binding agreement “unacceptable”. She said her government had considered leaving the meeting. “We are not defending this, as I have indicated, for us it is not acceptable, it is definitely not acceptable,” she said. There was even harsher criticism from Andreas Carlgren, environment minister of Sweden, current holder of the rotating European Union presidency, who proclaimed the Copenhagen accord “a disaster” and “a great failure”.


- Former President Bill Clinton came within minutes of being assassinated in the Philippines by terrorists controlled by Osama bin Laden, a new book has revealed. The US leader was saved shortly before his car was due to drive over a bridge in Manila where a bomb had been planted. The foiled attack came during Mr Clinton's visit to the Asia Pacific Economic Cooperation forum in the city in 1996. At one point during his stay, he was scheduled to visit a local politician, his route taking him across a bridge in central Manila. But as the presidential motorcade was about to set off, secret service officers received a "crackly message in one earpiece" saying intelligence agents had picked up a message suggesting an attack was imminent. The transmission used the words "bridge" and "wedding" – a terrorists code word for assassination. The motorcade was quickly re-routed and American agents later discovered a bomb had been planted under the bridge. The subsequent US investigation into the plot "revealed that it had been masterminded by a Saudi terrorist living in Afghanistan – a man named Osama bin Laden". Although al Qaeda members have admitted targeting Mr Clinton in the 1990s, no evidence has previously emerged suggesting the group's leader was involved or that the terrorists came close to succeeding. Ken Gormley, an American law professor, said he was told by Louis Merletti, the former director of the Secret Service, of the bomb plot.

Late Buy/Sell Recommendations

- Reiterated Buy on (STT), target $66.

- While our thesis on the housing market has not changed(an anemic recovery due to too much supply and not enough qualified buyers), we are more bullish on the homebuilder stocks than we have been in some time given the recent sell-off and the upcoming spring selling season. Our top picks are (MTH), (PHM) and (TOL).

- Reiterated Buy on (CMC), lowered target to $20.

Night Trading
Asian Indices are +.25% to +.75% on average.

Asia Ex-Japan Inv Grade CDS Index 96.0 -.50 basis point.
S&P 500 futures +.11%.
NASDAQ 100 futures +.08%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

U.S. Equity Preview

TradeTheNews Morning Report

Briefing.com In Play

SeekingAlpha Market Currents

Briefing.com Bond Ticker

US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (AM)/.66

Economic Releases

8:30 am EST

- Personal Income for November is estimated to rise +.5% versus a +.2% gain in October.

- Personal Spending for November is estimated to rise +.7% versus a +.7% gain in October.

- The PCE Core for November is estimated to rise +.1% versus a +.2% gain in October.

10:00 am EST

- Final Univ. of Michigan Consumer Confidence for December is estimated to rise to 73.8 versus a prior estimate of 73.4.

- New Home Sales for November are estimated to rise to 438K versus 430K prior.

10:30 am EST

- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,600.000 barrels versus a -3,689,000 barrel decline the prior week. Gasoline supplies are expected to rise by +1,000,000 barrels versus a +879,000 barrel gain the prior week. Distillate inventories are expected to fall by -2,000,000 barrels versus a -2,954,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by +.4% versus a -1.10% decline the prior week.

Upcoming Splits
- None of note

Other Potential Market Movers
The BoE minutes and the weekly MBA mortgage applications report could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial shares 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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