Today's Headlines

Bloomberg:

- The cost of living in the U.S. rose in January less than anticipated and a measure of prices excluding food and fuel fell for the first time since 1982, indicating the recovery is generating little inflation. The consumer-price index increased 0.2 percent for a fifth straight month, led by higher fuel costs, Labor Department figures showed today in Washington. Excluding energy and food, the so-called core index unexpectedly fell 0.1 percent, reflecting a drop in new-car prices, clothing and shelter. Retailers such as Wal-Mart Stores Inc. have reduced prices to lure customers at a time when most employers are reluctant to hire. Restrained inflation will allow Federal Reserve policy makers to keep the benchmark interest rate close to zero to help support the recovery. “The broader picture remains one of subdued inflation, and this gives the Fed ample reason to stay on the sidelines until at least very late in the year,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, who forecast no change in the core index.

- Bill Gross, who runs the world’s biggest mutual fund at Pacific Investment Management Co., told CNBC that he expects the Federal Reserve to keep its target rate for overnight loans between banks near zero through this year. The increase of the discount rate charged to banks for direct loans to 0.75 percent from 0.50 percent yesterday was likely made to “appease the hawks” among policy makers, Gross said. He doesn’t anticipate additional increases in the discount rate by the central bank. Investors should still expect the difference in yields on shorter- and longer-maturity Treasuries, known as the yield curve, to remain steep with the Fed unwinding its quantitative easing programs, Gross said. The 2- to 10-year spread steepened to a record 294 basis points yesterday.

- Cotton rose to the highest price since July 2008, resuming this month’s rally, on speculation that supplies will remain tight this year as demand increases. U.S. export sales of upland cotton more than doubled in the first five weeks of 2010 from the same period last year, U.S. Department of Agriculture data show. Global imports will jump 12 percent to 33.8 million bales in the year through July, the USDA said on Feb. 9. A bale weighs 480 pounds, or 218 kilograms.

- For gun-control advocates, defeat may be inevitable in the Chicago handgun-ban case before the U.S. Supreme Court. The question is whether they will get a consolation prize.

- U.K. retail sales dropped more than twice as much as economists forecast in January as the nation’s winter freeze thwarted spending on items from food to furniture. Sales excluding gasoline fell 1.2 percent from December, the Office for National Statistics said today in London. Economists predicted a 0.5 percent drop, according to the median of 26 forecasts in a Bloomberg News survey. The report uses new methodology in line with European rules. The longest cold snap since 1981 snarled traffic and kept workers home last month just as Chancellor of the Exchequer Alistair Darling raised value-added tax. With jobless claims at the highest since 1997 and the prospect of a government budget squeeze taking hold after the election, weakness in consumer spending may jeopardize the economic recovery.

- Iran has put into service the country’s first domestically produced guided-missile destroyer, the Jamaran. Supreme Leader Ayatollah Ali Khamenei launched the 94-meter (308-foot), 1,400-ton vessel at a site in the Persian Gulf, state-run Press TV said today.

- North Korea won’t give up its nuclear deterrent for “economic reward” in the form of food, fuel or loans, the state-run Korea Central News Agency said, amid a diplomatic drive to revive talks on the nation’s weapons. The country made economic sacrifices and spent a “stupendous amount of money” to develop the weapons to defend itself from aggression and not to “threaten others nor to get any ‘economic benefit,’” KCNA said in an editorial today.

- Federal Reserve Bank of New York President William Dudley said the U.S. economy is recovering from the recession with stronger-than-expected growth and diminishing job losses. “We currently expect that the economy will keep expanding, but at a somewhat slower growth rate than during the second half of 2009,” Dudley said today in the text of a speech to an economic conference in San Juan, Puerto Rico. “With modest growth, we expect price pressures to remain well contained.”

- J.C. Penney Co.(JCP), the third-largest U.S. department-store chain, posted profit that fell less than analysts predicted, bolstered by women’s clothing and shoes. The stock surged in New York trading.

- President Barack Obama’s health-care proposal will include new rules for insurance companies and greater oversight on the industry, Health and Human Services Secretary Kathleen Sebelius said in an interview. “More oversight, more transparency, and new rules for health insurers are going to be part of health reform,” Sebelius told Bloomberg Television. She mentioned medical loss ratios, which mandate how much insurers have to spend on health benefits as opposed to administrative costs. Obama will release a proposal to restart the health-care debate before a bipartisan White House meeting on Feb. 25. He wants a final bill to be “comprehensive,” Sebelius said.

Wall Street Journal:

- The government of Greece is set to launch a new bond offering in coming days, a sale that could help determine whether Greece's own debt crisis spreads to the rest of Europe. While leaders across Europe continued to wrestle with a bailout of the Aegean nation, Greece's leaders appeared to be pushing ahead on a bold course: directly testing the markets with a 10-year offering of as much as €5 billion ($6.8 billion), according to a person familiar with the country's plans. If successful, the offering could help soothe bond markets across Europe.

- Tiger Woods publicly apologized for his sex scandal Friday, but the star golfer left unclear when he would return to the sport. In his first public appearance since the November car accident that touched off the scandal, Mr. Woods defiantly denied rumors that his wife might have hit him, and he implored the media to leave his family alone. He also acknowledged that he has been receiving in-patient therapy for his issues. "I have a lot to atone for," Mr. Woods said.

- When has the European financial system been under the greatest strain? The surprising answer is this week, at least according to prices in the credit derivatives market. Greece's contagious debt woes and the focus on sovereign risk have pushed one widely watched indicator -- the relative cost of insuring European financial debt against broader corporate credits -- to a new record level. The move shows clearly that the financial system remains fragile. But it might also be overdone.

The Business Insider:

- Get Your Tinfoil Hats On: Greece’s New Debt Czar Used To Work For Goldman’s(GS) Derivatives Team. The new face of Greece's debt crisis is Petros Christodoulou and he used to work for Goldman Sachs, according to Zero Hedge. Before being named Head of Debt Management for Greece, Christodoulou held positions at several investment firms previously, including Goldman Sachs, before turning up in the Greek government. This will surely add fuel to the conspirators' fires over Goldman's involvement with the downfall of Greece, specifically the fact that Christodoulou used to head up the private banking division of the Greek treasury, according to Zero Hedge. With Goldman already implicated over a questionable swap arrangement with Greece, things are sure to get even more dicey for the bank in Europe.

- Spain’s “Fannie & Freddie” Starting To Show Dramatic Deterioration. Everyone knows Spain is on the brink of a potentially massive debt crisis, and now their state sponsored entities are starting to show it. The Spanish Instituto Credito Oficiale, or ICO, is a state backed entity that provides funding to small businesses. It is now showing widening spreads against Spanish government debt, according to FT Alphaville.

- Old euro currency system skeptics are coming out of the woodwork with I-told-you-so grins these days. That's because the current European crisis is damning proof of their old argument that a single currency isn't sustainable if it is shared by multiple different nations each with independent economic policies. The euro system seemed to work for awhile, but now we have discovered that problems were mounting all along.

zerohedge:

- This story gets more surreal by the day. First it was the Spanish CIA, and now Greek daily To Vima reports that the Greek National Intelligence Service, instead of focusing on such potentially more pressing issues as who may be bombing various offshore financial offices, or possible Cypriot unrest, is hot on the heels of those who were solely responsible for the Greek bond market collapse: four hedge funds who have had the temerity to buy and sell Credit Default Swaps (or, heaven forbid, GGBs).

BusinessWeek:

- More than 20 billion euros ($27 billion) of top-rated bonds backed by Greek loans have been placed on review for possible downgrade because of the country’s worsening economy, Moody’s Investors Service said. The study affects all but one of the Aaa ratings on Greek asset-backed securities, mortgage-backed notes and collateralized loan obligations, Moody’s said in a statement. Greek sovereign debt was downgraded by Moody’s in December to A2, its sixth-highest investment grade ranking, as public finances deteriorated and its deficit rose to 12.7 percent of the gross domestic product.

Schulte Roth & Zabel:

- Hedge Funds in the Crosshairs: The Law of Insider Trading in an Active Enforcement Environment.

LA Times:

- Fewer home loans are going bad these days, the Mortgage Bankers Assn. said Friday in its quarterly delinquency report. Calling the finding surprising, the trade group interpreted it as a signal that the housing markets are healing. “We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007, continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding, and culminated with a recession that saw 8.5 million people lose their jobs,” Jay Brinkmann, the group's chief economist, said in a statement.

Chicago Sun-Times:

- Climate turning against kooky alarmists. The latest revelation is that there's been no significant warming for 15 years. One prominent climate scientist has acknowledged the current warming period may be no hotter than the medieval warming era (800 to 1300 A.D.) when the world lived green with nary a SUV or industrial smokestack around. The devastating Hurricane Katrina of 2005 was cited as the harbinger of killer storms to come, spawned by a warming planet. Then came this winter's record snowstorms. Now the climate alarmists lecture us that one season's weather tells us nothing about climate change. Actually, they've gone further to claim that the cold weather mess is in fact a product of a hotter globe. Their cause has come to resemble religion more than science -- it explains everything! One British Internet site, www .numberwatch.co.uk/warmlist.htm, offers a list of articles linking global warming to a whole catalog of woes -- from the conflict in Darfur to the deadly 2007 Minneapolis I-35 bridge collapse to more potent dope from poppies to higher waves off the Pacific Northwest coast to a boom in kitten litters in Toronto to the prevalence of acne. Some of that's good for cheap laughs. But the gloom and doom prophets have set themselves up for ridicule.

The Economist:

- It is not so much that America is ungovernable, as that Mr Obama has done a lousy job of winning over Republicans and independents to the causes he favours. If, instead of handing over health care to his party’s left wing, he had lived up to his promise to be a bipartisan president and courted conservatives by offering, say, reform of the tort system, he might have got health care through; by giving ground on nuclear power, he may now stand a chance of getting a climate bill. Once Mr Clinton learned the advantages of co-operating with the Republicans, the country was governed better.

CTVNews:

- The FBI has decided with finality that a U.S. government researcher acted alone in the deadly 2001 anthrax mailings and is closing its long-running investigation, a person familiar with the case said Friday. The anthrax letters were sent to lawmakers and news organizations as the nation United States in the aftermath of the Sept. 11, 2001, terror attacks when hijacked airliners were flown into the World Trade Center in New York and the Pentagon in suburban Washington.

NJ.com:

- Gov. Christie told a group of business leaders today that his first budget will not include a corporate business tax surcharge that has been repeatedly renewed by Democrats in Trenton. Christie, a Republican who beat former Gov. Jon S. Corzine in November by promising to cut taxes and reduce government spending, said he will let the 4 percent surcharge sunset in the budget he will present on March 16. The goal is to give businesses "more money for them to hire more people," he said this morning during an hourlong round table discussion with business leaders in Lumberton, Burlington County.

USAToday:

- Any reform of America's health care system must begin with a bold effort to reduce costs. Unfortunately, despite candidate Obama's promises, President Obama and the Democrats in Congress favor health care legislation that does little to address costs. In fact, these bills would only increase the cost of health care for American consumers.

Reuters:

- A forward-looking measure of U.S. economic growth slipped further in the latest week, while its yearly growth gauge continued to slide from October's record highs, suggesting expansion will likely ease by mid-year, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 128.4 for the week ended Feb. 12 from 130.0 the prior week. It was the lowest reading since November 13, 2009, when it stood at 127.5. The index's annualized growth rate declined for the tenth straight week to 17.1 percent, from 19.6 percent in the prior report, which was revised down from an original 19.7 percent.

It was the lowest rate since Aug. 7, 2009 when it read 14.6 percent. Reaffirming last week's forecast, ECRI Managing Director Lakshman Achuthan emphasized that the pace of economic expansion "will begin to ease off by mid-2010," as the yearly growth figure continued to fall from an October record high.