Friday, November 09, 2012

Friday Watch

Evening Headlines 
Bloomberg: 
  • Draghi Makes OMT Policy Weapon of Choice as ECB Relegates Rates. Mario Draghi’s bond-buying plan has become the European Central Bank’s weapon of choice to reduce interest rates even before it has been activated. ECB President Draghi yesterday praised the impact of the so-called OMT program in lowering borrowing costs, while playing down the prospect of further ECB rate cuts. “Market confidence has visibly improved on the back of our decisions as regards Outright Monetary Transactions,” he said. The announcement “by itself produced an easing of financial-market conditions.”
  • Euro Drops to Two-Month Low After Ministers Delay Aid to Greece. The euro fell to a two-month low versus the dollar after European Union finance ministers said they will delay for “weeks” the decision to give Greece its next round of aid. The single currency declined as European Central Bank President Mario Draghi said economic growth was expected to remain weak. The yen gained against all of its main peers as investors sought safer assets amid concern re-elected U.S. President Barack Obama will struggle to avert the fiscal cliff. South Africa’s rand tumbled as mining output fell the most in five months.
  • Obama Victory Leads Wealthy to Make Quick Pre-2013 Moves. The race is on for wealthy Americans to save on taxes before Jan. 1. President Barack Obama’s re-election means his administration will push to let tax cuts enacted during the George W. Bush era expire for high earners, as scheduled, at year-end. Obama wants to increase the top federal income tax rate to 39.6 percent from 35 percent, boost rates on long-term capital gains to as much as 23.8 percent, and shrink exemptions from estate-and-gift taxes. “If you have to put a movie title on what’s going to happen from now until the end of the year it would be: ‘The Fast and the Furious,’” said Jeff Saccacio, a personal financial services partner at New York-based PricewaterhouseCoopers LLP. “The wise, smart people are preparing themselves for a sunset of the Bush tax cuts.” Wealthy investors have about a month and a half to examine their investment gains and losses left over from previous years, as well as to consider ways to move income into 2012 and transfer assets to heirs, Saccacio said. Now is the time to start running the calculations, he said. “Acceleration of investment income is clear,” said Elda Di Re, partner and personal financial services area leader for Ernst & Young LLP in New York. “If anyone was planning on realizing a gain in the next two to three years on either securities or real estate, there’s a considerable amount of money to be saved.” 
  • Gold Traders More Bullish After Obama’s Re-Election: Commodities. Gold traders are the most bullish in 11 weeks and investors accumulated record bullion holdings on speculation U.S. policy makers will add to stimulus following President Barack Obama’s re-election. Twenty-five of 33 analysts surveyed by Bloomberg expect prices to rise next week and three were bearish. A further five were neutral, making the proportion of bulls the highest since Aug. 24. Investors boosted assets in gold-backed exchange-traded products to an all-time high of 2,592 metric tons on Nov. 7, valued at $143.1 billion, data compiled by Bloomberg show.
  • Palestinians Defy Obama With UN ‘Observer State’ Bid. Palestinians defied newly re-elected U.S. President Barack Obama by pushing ahead with a second statehood bid at the United Nations that will raise their profile at the world body and highlight the stagnation of the Mideast peace process. The Palestinian Authority yesterday circulated a resolution to put the Palestine Liberation Organization on a par with the Holy See, according to a draft that will be put to a vote in the UN’s 193-member General Assembly, where the initiative has enough support to pass and the U.S. lacks veto power. The latest steps by the Palestinians present Obama with his first foreign-policy challenge three days after he won a second term.
  • Priceline(PCLN) Buys Kayak for $1.8 Billion Expanding in Travel. Priceline.com Inc. (PCLN), the most valuable online-travel agency, is buying Kayak Software Corp. (KYAK) for $1.8 billion in cash and stock, adding profitable search tools to its reservation services.
Wall Street Journal: 
  • Pressure Rises on Fiscal Crisis. White House, Lawmakers Try to Push Ahead Amid New Warnings Over Inaction. The White House and Republican lawmakers faced pressure to reach a solution to the looming budget crisis after a nonpartisan agency detailed Thursday how inaction would push the U.S. economy back into recession next year, and skittish investors continued to drive stocks lower. Economists from the Congressional Budget Office detailed new warnings of an economy speeding toward a so-called fiscal cliff created by a combination of government spending cuts and tax increases set to take effect Jan. 1.
  • Heartland Draws Hispanics to Help Revive Small Towns.
  • Battle Plan Shifts on Dodd-Frank. Many bankers and investors who supported Mitt Romney hoped the Republican's election would pave the way for a paring back of the 2010 Dodd-Frank financial overhaul. But while President Barack Obama's victory means the law will stand, the finance industry could yet trim some parts of the law because changes now are politically less risky for the administration and Democrats in Congress. "The door is open for modifications that can produce economic growth," said Jaret Seiberg, Washington analyst with Guggenheim Securities.
  • China Village Hits Democracy Limits. A Year After Promises to Return Land, Progress Is Slow; Liberalization Hopes Turn to a Party Pushed by Web-Savvy Public.
  • California's Liberal Supermajority. Taxpayers are going to get all the government they ever wanted.
MarketWatch.com: 
  • Australia central bank cuts growth forecasts. Australia's central bank trimmed its growth forecasts on the back of cooling investment in the nation's mining sector and a softer global outlook. It comes as a number of major mining companies, including BHP Billiton Ltd. (BHP), have shelved expansion plans and shed staff in recent months amid weaker prices for industrial commodities. In a quarterly outlook released Friday, the Reserve Bank of Australia, or RBA, said it now expected growth to average 3.0% in the current fiscal year, compared with an August forecast for growth of between 3.0% and 3.5%.
  • Fed policy may be easier than understood: Bullard.
  • Groupon(GRPN) punished on third-quarter miss. Shares fall hard as European weakness hurts sales growth.
CNBC: 
  • El-Erian: Really Depressing Numbers Out of Greece. The jobless rate for 15- to 24-year-olds is 58% – 58%! And there is reason to believe future employment reports will be even worse. This is a distressingly sad situation.
  • Stock Market Gets More Manic as Fiscal Cliff Fears Escalate. Stocks are breaking key technical levels, a possible sign of more selling, as anxiety builds about Washington’s handling of the 'fiscal cliff. 
  • Tax Hike ‘Not Going to Happen’: GOP Official. A top congressional Republican on Thursday expressed hope that a budget deal would be reached that gives both parties some of what they want — unless it involves a tax increase. House Chief Deputy Whip Peter Roskam made overtures toward avoiding the so-called “fiscal cliff,” which would trigger automatic federal spending cuts and the expiration of the Bush tax cuts. Although Obama had campaigned on a platform of raising marginal tax rates, Roskim dismissed such talk as “flowery rhetoric that he used to pump up his base.” “I predict he will do it again, simply because the House is not going to pass a tax hike,” he said. “It’s just not going to happen.”
  • Disney(DIS) Earnings Meet Expectations, Revenue Misses. Walt Disney reported quarterly earnings on Thursday that matched analysts' expectations, while revenue fell short.
  • Why Inflation in China Will Raise Its Head Again. China’s October Inflation numbers came in below expectations, proving to be of little concern to the country’s policymakers at the moment, but economists warn the inflation rate could double by mid-2013 as growth in the world’s second largest economy gains momentum.
  • Eurozone Faces Brinkmanship on Greece. Eurozone leaders face a new round of brinkmanship over Greece’s €174bn bailout after international lenders failed to bridge differences on how to reduce Athens’ burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week.
Zero Hedge: 
Business Insider: 
NY Times: 
  • Debt Ceiling Complicates a Tax Shift. Come January, should Congress fail to act, the United States will face more than immense tax increases and spending cuts. It will also run out of room to finance its large running deficits.
Forbes:
Reuters: 
  • Exclusive: SEC left computers vulnerable to cyber attacks - sources. Staffers at the U.S. Securities and Exchange Commission failed to encrypt some of their computers containing highly sensitive information from stock exchanges, leaving the data vulnerable to cyber attacks, according to people familiar with the matter. While the computers were unprotected, there was no evidence that hacking or spying on the SEC's computers took place, these people said.
  • CME Group(CME) sues to freeze CFTC swap reporting rules. Exchange operator CME Group asked a U.S. court on Thursday to prevent the chief U.S. derivatives regulator from enforcing swap reporting rules passed after the 2008 financial crisis. Thursday's lawsuit, filed in federal court in Washington D.C., is the third industry challenge to the Commodity Futures Trading Commission (CFTC) in its history.
  • Wall St gadfly Warren stands good chance of Senate banking seat. The chances are good, but not guaranteed, that Elizabeth Warren will secure a highly coveted seat on the Senate Banking Committee, a move that would dramatically elevate her campaign against Wall Street excess. Senior Senate Democratic aides, speaking on condition of anonymity, said the Massachusetts senator-elect is a logical fit for the committee, even though it is rare for a freshman senator to get such a plum assignment. If she gets the slot, Warren's bully pulpit would be replaced with real power.
  • China slaps anti-dumping tariffs on European, Japanese steel tubes. China said it will impose five-year anti-dumping tariffs on high-performance stainless steel tube imports from the European Union and Japan, highlighting commercial tensions between Beijing and major trading partners. The tariff will range from 9.2 percent to 14.4 percent and will become effective on Friday, the Ministry of Commerce said in a statement on its website on Thursday.
  • Nvidia(NVDA) eyes lower quarterly revenue, starts dividend. Nvidia forecast revenue below expectations due to a slowdown in tablet-processor shipments and a troubled PC market but shares of the graphics chipmaker rose on the announcement of a quarterly dividend. With PC sales suffering from economic uncertainty and a growing consumer preference for tablets, Nvidia has staked its future on leveraging its graphics expertise to make high-performance processors for mobile devices.
Telegraph: 
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.50% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 121.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 87.25 -.25 basis point.
  • FTSE-100 futures -.05%.
  • S&P 500 futures +.39%.
  • NASDAQ 100 futures +.44%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (FSS)/.07
  • (FWLT)/.44
  • (JCP)/-.01
  • (STRA)/.31
  • (WCRX)/.77
Economic Releases
8:30 am EST
  • The Import Price Index for October is estimated unch. versus a +1.1% gain in September.
9:55 am EST
  • Preliminary Univ. of Mich. Consumer Confidence for November is estimated to rise to 83.0 versus 82.6 in October.
10:00 am EST 
  • Wholesale Inventories for September are estimated to rise +.4% versus a +.5% gain in August.
Upcoming Splits
  • (HBNC) 3-for-2
Other Potential Market Movers
  • The China retail sales/industrial production/fixed asset investment data and Eurozone CPI could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly mixed. The Portfolio is 25% net long heading into the day.

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