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.

Bear Radar

Style Underperformer:
Large-Cap Growth (-.03%)

Sector Underperformers:
Education (-2.72%), Alt Energy (-1.26%) and Computer (-1.18%)

Stocks Falling on Unusual Volume:

SLXP, DELL, AXA, CHA, IM, CHU, MMSI, TLVT, UEIC, LOPE, APOL, FSYS, CSIQ, DGIT, WMGI, FSLR, HME and VQ

Stocks With Unusual Put Option Activity:
1) ERTS 2) SLXP 3) SII 4) DELL 5) CMCSA

Bull Radar

Style Outperformer:
Small-Cap Value (+.49%)

Sector Outperformers:
Steel (+1.51%), Banks (+1.39%) and Road & Rail (+1.25%)

Stocks Rising on Unusual Volume:
SCHW, AMTD, DTE, CW, HSY, DTV, GLBC, CLF, BW, ARUN, WBMD, HITT, RRGB, SHPGY, ECLP, INTU, CPKI, AGII, LPNT, ADBE, NTRS, SIRO, JOSB, SII, JCP, GGC, AGP, SFY, CFI and CHE

Stocks With Unusual Call Option Activity:
1) SLXP 2) INTU 3) SII 4) CF 5) JCP

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Friday Watch

Late-Night Headlines
Bloomberg:

- The Federal Reserve Board raised the discount rate charged to banks for direct loans by a quarter point to 0.75 percent and said the move will encourage financial institutions to rely more on money markets rather than the central bank for short-term liquidity needs. “These changes are intended as a further normalization of the Federal Reserve’s lending facilities,” the central bank said today in a statement. “The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy.”

- Federal Reserve Chairman Ben S. Bernanke has been asked by a Republican lawmaker to turn over documents related to the decision to rescue insurer American International Group Inc. The Federal Reserve should deliver the records by March 2, according to a letter dated yesterday from Representative Darrell Issa of California, ranking member of the House Oversight and Government Reform Committee. Bernanke last month invited the Government Accountability Office to conduct a “full review” of the central bank’s actions tied to the bailout that swelled to $182.3 billion. “In light of your professed commitments and your apparent desire to cooperate with this committee’s investigation, I am writing to request that you voluntarily produce to this committee all records and communications in the possession of the Federal Reserve” regarding the rescue, Issa wrote. Issa is seeking to widen the probe into what he’s called a “backdoor bailout” of banks that got funds from AIG after its rescue and efforts by the Federal Reserve Bank of New York to withhold details from the public about the payments. Treasury Secretary Timothy Geithner, who ran the New York Fed when AIG was bailed out in 2008, testified last month that the payments were necessary and that subordinates made disclosure decisions.

- Japan’s central bank chief escalated pressure on Prime Minister Yukio Hatoyama to contain the world’s largest debt with a warning that investor “trust” won’t be assured in the aftermath of Greece’s budget woes. “It’s important to gain the trust of financial markets by showing a path for fiscal consolidation,” Governor Masaaki Shirakawa said in Tokyo yesterday. He spoke after his policy board kept interest rates, the level of its government-bond purchases, and bank-lending programs unchanged. Shirakawa’s remarks reflect his concern that increasing the Bank of Japan’s debt purchases risks giving investors the impression that it is willing to fund fiscal expansion. “Shirakawa wants to give a fresh reminder that Japan will lose trust from the market if the nation uses monetary policy to support the government’s finances,” said Norio Miyagawa, a senior economist at Shinko Research Institute in Tokyo. “Basically, it’s impossible to escape from deflation with monetary policy alone.”

Credit-default swaps tied to Japan’s government bonds show an increase in risk. The cost of protecting the debt from default for five years has doubled to 78.8 basis points since the Hatoyama administration started on Sept. 16, according to prices from CMA DataVision in New York. Central bank board member Seiji Nakamura warned this month that the government can’t ignore Greece’s fiscal woes, saying in a speech that the European country’s concerns aren’t just a “burning house on the other side of the river.”

- The dollar touched a nine-month high against the euro after the Federal Reserve raised the discount rate charged to banks for direct loans for the first time in more than three years. The U.S. currency headed for a sixth week of gains against the 16-nation euro as the central bank took another step to withdraw from the unprecedented measures it used to halt the financial crisis. The Australian and New Zealand currencies fell for a third day on concern higher U.S. borrowing costs will weaken the yield advantage of the South Pacific nations’ assets. “The Fed’s action came as a surprise and enhanced speculation that it will withdraw stimulus ahead of major peers,” said Tomokazu Matsufuji, a dealer in Tokyo at SBI Liquidity Market Co., a unit of financier SBI Holdings Inc. “This will drive the dollar higher.”

- The U.S. dollar will gain on bets the Federal Reserve will accelerate increases in its target lending rate following an unexpected change in its discount rate yesterday, Commonwealth Bank of Australia said. The euro will drop to $1.32 while Australia’s dollar may fall toward 86.45 U.S. cents on speculation the Fed will announce its first upward adjustment to the benchmark rate since 2006 sooner than traders had forecast, the bank said. Futures yesterday showed a 47 percent chance the target rate for overnight lending will increase by at least 25 basis points by the Fed’s September meeting. “Today’s rise in the discount rate, along with the Fed’s increase in growth and inflation forecasts, suggests the risk is that the Fed’s first rise in the target on the Fed’s funds rate is earlier” than September, Sydney-based Richard Grace, chief currency strategist at Commonwealth Bank, wrote in a note to clients. “The move by the Fed is U.S. dollar positive.” The dollar gained to $1.3444 per euro today, the strongest since May 18. It rose to 89.29 U.S. cents per Australian dollar from 90.20 cents before the rate announcement. CBA expects the Fed to announce 25 basis points of additional increases to the discount rate charged to banks for direct loans at its April 28 and Aug. 10 meetings. That would take the rate back to “its traditional spread to the target on the Fed funds rate,” Grace said.

- Euro's Bungled Unity Bid Hits Fine Print Amid Greek Debt Drama.

- The United Nations said $1.4 billion is needed to provide food, water, shelter and sanitation to 3 million Haitians throughout 2010, the largest appeal following a natural disaster in the world body’s history. The request includes the $577 million initially sought for the first six months after the Jan. 12 earthquake that killed about 230,000 people in the Caribbean nation and left more than 1 million in need of emergency shelter. The UN has received $619 million so far from UN member nations. “It is designed to finance the continuing costs of emergency relief, but more than that it is designed to help lay the foundation for Haiti’s recovery and reconstruction,” UN Secretary-General Ban Ki-moon said. “Done right, we can turn tragedy into opportunity -- an opportunity to reinvent Haiti.”
- Europe will be drowning in debt by 2020 unless it embarks on an "age of austerity," according to Fortis Bank Nederland NV. Slower economic growth combined with higher refinancing costs will drive up debt levels across the 16-nation euro area unless governments continue consolidation efforts beyond the measures already planned for this year and next, Fortis said. Greece's overall debt would surge to 174% of gross domestic product from 113% last year, while Portugal, Ireland and Spain would face debt-to-GDP ratios of 157%, 140% and 129% respectively. Only Finland would reduce its debt and keep it below the European Union's limit of 60% of GDP, according to Fortis.

- Options traders are paying the most to protect against a drop in Chinese stocks since the depths of last year’s global financial crisis as policy makers in Beijing take steps to cool economic growth. The gap between the implied volatility of options betting on a decline in the iShares FTSE/Xinhua China 25 Index Fund and those that would profit from a gain widened to 7.4 on Feb. 17, the biggest since March, and was at 6.9 yesterday, according to data compiled by Bloomberg. The exchange-traded fund, which holds shares of Chinese companies and trades on U.S. bourses, has dropped 14 percent from its 2009 high on Nov. 16 as the People’s Bank of China ordered lenders to set aside larger reserves in a bid to cool inflation in the fastest-growing major economy. Investors are also concerned that China may let its currency strengthen, making exporters less competitive, according to AlphaShares LLC. “There’s a lot of anxiety about how policy makers keep increasing the reserve ratio for banks and what a strengthening yuan would do to the giant export machine,” said Jonathan Masse, who helps oversee about $480 million in Chinese stocks at Walnut Creek, California-based AlphaShares LLC, the fund company co-founded by Princeton University economist Burton Malkiel.

- The European Union risks repeating Japan’s mistakes of the 1990s as it helps Greece tackle the region’s biggest budget deficit, said Jeremy Beckwith, chief investment officer of Kleinwort Benson. “Greece and the European Union is the world’s biggest game of chicken” since the Cuban missile crisis in 1962, Beckwith said in an interview at the wealth manager’s Edinburgh office. “It’s an effective tightening of policy that we were not expecting a few weeks ago. It’s quite worrying.”

Wall Street Journal:

- The Federal Reserve raised an interest rate it charges banks for emergency loans, and emphasized that a broader tightening of credit for consumers and businesses is still at least several months away. But the late-afternoon increase in the discount rate didn't have the muted impact Fed officials hoped for. Stock futures and bond prices fell, and the dollar rose against the euro. "The Fed can talk all day about how the discount rate hike is technical and not a policy move, but the market sees it as a shot across the bow," Christopher Rupkey, an economist at Bank of Tokyo-Mitsubishi, said in a note to clients.

- The United Nations' nuclear watchdog said it has information suggesting Iran may be working to build a nuclear warhead, an assessment that could escalate the U.S. and other Western governments' confrontation with Iran over its nuclear activities. The International Atomic Energy Agency, a Vienna-based U.N. body, said in a confidential report Thursday that Iran has impeded agency efforts to establish the true purpose of Tehran's nuclear program. "The information available to the agency...raises concerns about the possible existence in Iran of past or current undisclosed activities related to the development of a nuclear payload for a missile," IAEA Director General Yukiya Amano wrote in the report. The expression of concern over the "weaponization" of enriched uranium is a first for the agency.

- The Canadian government will declare its opposition to a global bank tax on transactions and services, potentially blocking efforts by some global leaders to have the tax adopted world-wide. The Canadian Finance Minister, Jim Flaherty, could make a statement on his country's opposition to the tax as early as Friday, according to a senior government official.

- Cisco Systems(CSCO) on Thursday said it was dropping H-P(HPQ) from its reseller program, capping off a year in which the two tech giants have increasingly encroached on one another’s turf. The change, which will take effect April 30, means that H-P will no longer have access to information like Cisco’s product roadmaps, which help partners make long-term plans for how to position Cisco gear. H-P will still be able to sell Cisco products to its customers, but it won’t be eligible for rebates and other incentives.

- The dean of a Hebrew day school in Brooklyn was arrested and charged Thursday in an alleged scheme to extort $4 million from a Connecticut hedge fund. Rabbi Milton Balkany, the dean of the Bais Yaakov day school in the Borough Park section of Brooklyn, was charged with wire fraud, extortion, blackmail and making false statements. Mr. Balkany, 63 years old, faces up to 20 years in prison on the wire fraud count.

- A pilot slammed his small plane into a seven-story building that housed the local office of the Internal Revenue Service Thursday, apparently killing himself and one agency employee, in what federal officials described as a deliberate suicide attack amid a long-running tax dispute. Investigators are looking into whether the pilot, 53-year-old Andrew Joseph Stack, also set his house on fire before taking off in his single-engine Piper Dakota around 9:40 a.m. local time.

- Oil-services company Schlumberger Ltd.(SLB) is in advanced discussions to acquire Smith International Inc.(SII), according to people familiar with the negotiations, a deal that would create an industry giant with revenues double that of its nearest rival. The deal, which the companies could announce in coming days, would bring together two of biggest players in the business of oil field services, which help oil companies locate and drill for oil deposits. Smith's current market capitalization is around $7.5 billion. Assuming a typical deal premium of around 20%, that would take the transaction in the $9 billion range.

NY Times:

- The Pulitzer Prize administrators have decided that The National Enquirer is eligible to compete for the awards, a person briefed on the matter said Thursday. Enquirer editors said they had submitted an entry before the Feb. 1 deadline for their work on the John Edwards scandal, but it was not clear whether the publication qualified for the Pulitzers, widely considered the most coveted honor for American newspapers.

- A series of online attacks on Google(GOOG) and dozens of other American corporations have been traced to computers at two educational institutions in China, including one with close ties to the Chinese military, say people involved in the investigation. They also said the attacks, aimed at stealing trade secrets and computer codes and capturing e-mail of Chinese human rights activists, may have begun as early as April, months earlier than previously believed. Google announced on Jan. 12 that it and other companies had been subjected to sophisticated attacks that probably came from China.

CNNMoney.com:

- Inside the crisis at AIG(AIG).

Politico:

- The Congressional Black Caucus is fighting back against its critics, ripping a New York Times article that investigated the caucus’s connections to corporate interests. A Times story that ran Feb. 14 focused on the CBC’s close connection to the fundraising efforts of the Congressional Black Caucus Foundation, including among companies that critics say are exploitative of the black community. In 2008, the Times reported, the foundation spent more money on a caterer for a single event than on its scholarship program. The CBC is angry that it’s being lumped in with the foundation’s work.

- President Barack Obama needs Harry Reid to get his legislative agenda through the Senate. Reid needs Obama for something more — his political survival. The two leading Democrats are taking those efforts to Las Vegas, where Obama is heading Thursday to bolster the embattled Senate majority leader. The president’s overnight trip, the first of his second year in office, is a sign of how entwined Reid and Obama’s fortunes have become. And of how Obama, whose administration was blindsided last week by Reid’s decision to abort a bipartisan jobs bill, isn’t holding a grudge but instead sees Reid’s success as essential to his own.

Rasmussen Reports:

- As California stumbles through its continuing budget crisis, 60% of likely voters in the state now believe it would be better if most incumbents in the state legislature were defeated in this November’s elections. A new Rasmussen Reports telephone survey in California finds just 17% think it would be better if most of the legislative incumbents were reelected.

AlterNet:

- The rumors of a possible partnership by John Paulson and Goldman Sachs(GS) in the speculative attacks on Greece, which I first reported on last week, are now heating up in Europe to the point where one French journalist has multiple sources corroborating them. No one can point to hard evidence, just yet, because these are opaque, unregulated markets. But the news is quickly rising above the status of rumor. The French financial newspaper Les Echos picked up on my post on John Paulson and Greece yesterday. Here is my (rough) translation:

Reuters:

- A group of Democratic lawmakers on Thursday asked Senator Dianne Feinstein to abandon draft legislation that would divert more water to California's farmers, a plan that has quickly become a flashpoint in the state's long-running water wars. Feinstein's proposal, which would ease Endangered Species Act restrictions, has angered environmental activists and fishing groups. The powerful Democratic senator's rebuke by members of her own party underscores the incendiary nature of water politics in America's No. 1 farm state. The 12 lawmakers, who sent a letter to Feinstein asking her to drop the plan, say it could ultimately lead to the extinction of Sacramento River salmon and eliminate up to 23,000 jobs in the Pacific coast fishing industry. Drastic cutbacks in irrigation supplies this year alone from state and federal water projects have idled about 23,000 farm workers and 300,000 acres (121,400 hectares) of cropland. California's Central Valley is one of the country's most important agricultural regions and the state's farmers produce more than half the fruit, vegetables and nuts grown in the United States. Feinstein told Miller she was aware of the fishing industry's decline but said two decades of water allocations had made little difference in salmon populations while farming communities had suffered. "Last year, 400,000 acres (162,000 ha) of land were fallowed. Laid-off workers have been forced to choose between standing in bread lines or leaving the valley in search of work elsewhere," she wrote. "Continuation on this path will lead to the destruction of agriculture. I refuse to sit by idly and do nothing."

- Distressed investors should brace for another wave of bankruptcies as early as this year as more corporate debt payments come due, a senior partner at Grant Thornton said on Thursday. Debt extensions have helped put off various crises and postponed some distressed situations or even bankruptcies. As the economic recovery stretches, however, more corporate pain can be expected, said Harris Smith, a managing partner with Grant Thornton's private equity group based in Los Angeles. "I think it's a matter of time before the bankruptcies start increasing again," Smith told Reuters. "People thought everything was getting better, but it perhaps it isn't."

- A senior U.S. Federal Reserve official sounded a warning on Thursday that inflation expectations are rising, while saying the economic recovery remains on track, though it has a long way to go.

- Dell Inc's (DELL) quarterly gross margin missed Wall Street expectations, hurt by sales of lower-priced personal computers for consumers and a rise in costs for memory chips and other components. The disappointing margin, which reflects Dell's dependence on the computer hardware market, sent its shares down 5 percent in extended trading on Thursday and overshadowed its stronger-than-expected profit and revenue for the quarter.

- Efforts to tighten financial regulation gained speed in the U.S. Senate on Thursday, with revised legislation seen as soon as next week from two key lawmakers now traveling together in Central America. Senate Banking Committee Chairman Christopher Dodd, a Democrat, and Republican Senator Bob Corker, a first-term member of Dodd's panel, are visiting Panama, Costa Rica and other nations on a Foreign Relations Committee trip. As they travel, the two were expected to discuss the bipartisan regulatory reform legislation they hope to unveil within days and bring before the Banking Committee, possibly for a vote as soon as the first week in March.

- First Solar Inc (FSLR), the lowest-cost photovoltaic solar manufacturer, posted a higher-than-expected profit, but its shares fell 6 percent as its outlook disappointed and profit margins narrowed.

- Intuit Inc (INTU) raised its full-year earnings forecast and said sales of its TurboTax tax preparation software will likely beat its previous expectations, sending its shares up 6 percent.

- North American semiconductor equipment makers posted $1.13 billion in average worldwide bookings in January, up 24.1 percent from December, reflecting strong signs of spending in the semiconductor device market. This month's bookings were more than three times higher than the $277.2 million in orders posted in the year-ago period, Semiconductor Equipment and Materials International (SEMI) said in a report. "Semiconductor capital equipment bookings are at the highest level since April 2008," SEMI Chief Executive Stanley Myers said. Book-to-bill ratio in January was 1.20, which means that $120 worth of orders was received for every $100 of product billed for the month.

Financial Times:

- President Barack Obama on Thursday met the Dalai Lama behind closed doors in the White House’s Map Room, an event set to test the US-China relationship in an already turbulent year. The Chinese foreign ministry issued a terse statement on Friday restating its objections: “The US grossly violated the norms governing international relations and ... went against the repeated commitments by the US government that it recognizes Tibet as part of China”. Cui Tiankui, the deputy foreign minister, said he had summoned US ambassador Jon Huntsman “to lodge solemn representations”, according to state-controlled Xinhua news agency. “We are in one of those moments where it is going to take maturity and calm on both sides not to have things unravel,” one former senior official in Beijing has said earlier.

Telegraph:

- Britain is at risk of a Government deficit crisis worse than that of Greece, sparking serious fears over the economic stability of the country.

Evening Recommendations

Citigroup:

- Reiterated Buy on (CLF), raised estimates, boosted target to $62.

- Upgraded (WBMD) to Buy, target $49.

Night Trading
Asian indices are -1.50% to -.50% on avg.

Asia Ex-Japan Inv Grade CDS Index 117.0 +3.0 basis points.
S&P 500 futures -.97%.
NASDAQ 100 futures -.87%.

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?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/Estimate
- (JCP)/.82

- (LPNT)/.60

- (HMSY)/.33

- (PCG)/.73

Economic Releases

8:30 am EST

- The Consumer Price Index for January is estimated to rise +.3% versus a +.1% gain in December.

- The CPI Ex Food & Energy for January is estimated to rise +.1% versus +.1% gain in December.

Upcoming Splits

- None of note

Other Potential Market Movers
- The Fed's Dudley speaking and the 4Q mortgage delinquencies report could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and financial stocks in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.