North American Investment Grade CDS Index 79.52 -.33%
European Financial Sector CDS Index 129.17 bps +1.13%
Western Europe Sovereign Debt CDS Index 172.33 bps -.96%
Emerging Market CDS Index 218.57 +.56%
2-Year Swap Spread 21.0 +1 bp
TED Spread 22.0 unch.
Economic Gauges:
3-Month T-Bill Yield .09% unch.
Yield Curve 283.0 +2 bps
China Import Iron Ore Spot $189.30/Metric Tonne -1.35%
Citi US Economic Surprise Index +72.0 -.1 point
10-Year TIPS Spread 2.37% +8 bps
Overseas Futures:
Nikkei Futures: Indicating -2 open in Japan
DAX Futures: Indicating -10 open in Germany
Portfolio:
Slightly Higher: On gains in my Medical and Retail long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades flat, despite recent equity gains, China inflation concerns and rising Mideast unrest. On the positive side, Education, HMO and Medical shares are especially strong, rising more than 1.0%. The Naz is holding up despite (AAPL) weakness. The 10-year yield is stable at 3.59%. Oil continues to mostly ignore the situation in the Mideast, rising inflation expectations, improving economic data and a rising euro. The UBS-Bloomberg Ag Spot Index is falling -1.6%. Lumber is rising +.81%. On the negative side, Disk Drive, Computer, Airline, Paper, Steel, Ag, Oil Tanker, Alt Energy and Coal shares are under pressure, falling more than 1.0%. Cyclicals are underperforming. The Saudi sovereign cds is jumping +9.54% to 138.28 bps and the Israeli sovereign cds is climbing +4.25% to 152.30 bps. US equities remain extraordinarily resilient to any potential headwinds as they continue their slow grind higher. Investor complacency regarding the deteriorating situation in the Mideast seems fairly high. Any significant decline in stability in the region from current levels will likely send oil back into the $90s. As well, rising unrest means more government food hoarding. Any meaningful rise in food or energy prices from current levels will significantly increase the odds of hard-landings in some key emerging market economies. So far, the market is mostly ignoring this possibility. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Mideast unrest, profit-taking, China inflation fears and more shorting.
Egypt Will Allow Iran to Send Two Naval Warships Through Suez on Way to Syria. Egypt approved a request from Iran to send two naval ships through the Suez Canal on their way to Syria, a move that has ratcheted up Middle East tensions and driven oil prices higher as Israel calls it a “provocation.” The U.S. is “monitoring” Iran’s plan to send warships through the Suez Canal, White House press secretary Jay Carney said today. Iran doesn’t show “responsible behavior in the region, which is always a concern to us,” Carney told reporters traveling on Air Force One to an appearance by President Barack Obama in Portland, Oregon.
Saudi Prince Says Protests May Move to Kingdom, BBC Arabic Says. A member of Saudi Arabia’s royal family warned that the Arab world’s largest economy may see protests unless King Abdullah Bin Abdul Aziz introduces reforms, according to BBC Arabic TV. Prince Talal Bin Abdul Aziz told the London-based broadcaster in an interview aired last night that “unless problems facing Saudi Arabia are solved, what happened and is still happening in some Arab countries, including Bahrain, could spread to Saudi Arabia, even worse.”Necessary reforms include developing the Shoura Council and implementing human and women’s rights, BBC Arabic reported on its website, citing Prince Talal. King Abdullah is the only member of the ruling family who believes in such reforms and is able to carry them out, according to the prince. Prince Talal also supported turning Saudi Arabia into a constitutional monarchy, the BBC added.
Saudi Arabia Default Swaps Jump on Bahrain Contagion Concerns. Credit-default swaps on Saudi Arabia surged on concern political unrest in neighboring Bahrain will spread to the world’s biggest oil exporter. Swaps on Saudi Arabia, used as a measure of confidence in the country although they reference no debt, jumped 11.5 basis points to 138, the highest since July 2009, according to CMA. Contracts on Bahrain rose for a fifth day, climbing 21 basis points to 307, the highest in 19 months. Tension is building throughout the Middle East. Credit- default swaps on Dubai increased 13 to 436, Abu Dhabi was up 6 at 107 and Qatar rose 3 basis points to 105, all the highest since Jan. 31. Egypt increased 5 basis points to 355 and Israel was up 5 at 152, the highest since July 2009.
China Raises Bank Reserve Ratios to Counter Inflation. raised reserve requirements for lenders 10 days after boosting interest rates as Premier China’s central bankWen Jiabao tackles accelerating inflation and the risk of asset bubbles. Reserve ratios will increase half a percentage point starting Feb. 24, the People’s Bank of China said on its website today in a one-sentence statement. Central bank Governor Zhou Xiaochuan said policy makers may also use means “including rates and currency” to tackle inflation, in an interview in Paris after the reserve-ratio announcement. “China has a profound liquidity and inflation problem that is, even with this latest tightening, getting further ahead of policy makers,” said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. “This is just the start from China and they will continuing tightening lending and raising interest rates, doing their utmost to contain this,” saidPhilippe Gijsels, the Brussels-based head of research at BNP Paribas Fortis Global Markets. “If the Chinese start to take out the liquidity that’s been so important, it’s got the potential to be a disturbance for the world’s stock markets.” In Paris, Zhou said raising reserve requirements is just one way to fight inflation. “We can’t really say that it’s the only method that we’ll use to battle inflation, it’s about using all means including rates and currency,” he said. “One method doesn’t exclude the other,” said Zhou, who’s attending a gathering of Group of 20 finance ministers and central bankers. Inflationary pressure “is still building up and it has become chronic for the medium term,” Shen Jianguang, a Hong Kong-based economist with Mizuho Securities Asia Ltd, said in a note on Feb. 15, citing rising labor and raw-material costs.
Treasury Bill Rates Close to Eight-Month Lows as Unrest Spurs Haven Demand. Three-month Treasury bill rates are close to the lowest levels in eight months as unrest in the Middle East bolsters the refuge appeal of the securities while investors ponder the direction of longer-maturity debt yields. The rate on U.S. government debtmaturing in three months traded at 0.0862 percent after slipping to 0.0821 percent yesterday, the lowest level since June 17. One-month bill rates were little changed at 0.0659 percent. “Anytime there is civil unrest anywhere people will flock to Treasury bills,” said Michael Franzese, head of Treasury trading at Wunderlich Securities Inc. in New York. “Also investors feel they can wait out in bills the uncertainty with regard to what is going on with Federal Reserve monetary policy and the direction of long-term Treasury yields.”
A Have and Have-Not Venture World. Top venture-capital firms including Accel Partners and Kleiner Perkins Caufield & Byers are riding the frenzy around companies like Facebook Inc. and Groupon Inc. to raise billions of dollars in new funds, even as the rest of the venture industry struggles to gather money. The new funds stand out in what is a bleak environment for most venture firms. Hit by the financial crisis and poor returns over the past decade, just 119 new venture funds were raised in the U.S. last year, totaling $11.6 billion in assets, according to research firm VentureSource.
Human-Rights Groups Says Dozens Have Died in Libya. Human-rights and opposition groups monitoring clashes in Libya said the army has deployed to the restive, eastern city of Benghazi, while security services and regime supporters have killed dozens of protesters in recent clashes, as unrest in the oil-rich North African country escalates. U.S.-based Human Rights Watch, citing multiple witnesses, Friday said at least 24 people have died in attacks on peaceful protesters across the country. Other expatriate Libyan groups say deaths exceed 50.
Iran Upgrades Nuclear Technology. Iran is redoubling its efforts to enrich uranium by upgrading the equipment at its nuclear facilities, after its enrichment program was severely disrupted by a computer virus, according to diplomats familiar with a new assessment by the International Atomic Energy Agency. The IAEA, the United Nations' nuclear watchdog, believes that Iran is seeking to replace thousands of centrifuges it has been using to enrich uranium with more modern, carbon-fiber centrifuges that can enrich nuclear fuel at about five times the speed of Iran's previous equipment, these diplomats say.
Wisconsin Senate Fails to Vote on Union Law. The Wisconsin Senate failed to muster enough members to vote for a second day Friday, holding up legislation that would strip state workers of most collective-bargaining rights and prompting Republicans to criticize their absent Democratic colleagues. Republican Senate Majority Leader Scott Fitzgerald said in a press conference after the brief session that he had asked state troopers to go to Democratic Minority Leader Mark Miller's home because he understands he is there. "I'm starting to hold Sen. Miller responsible for this," Mr. Fitzgerald said. Mr. Miller later told CNN that he was out of state, not at his home in Wisconsin.
House GOP Pushes to Derail Health Law. House Republicans pushed Friday to derail the Obama administration's health-care overhaul, preparing to bar the federal government from spending money on the plan. Rep. Denny Rehberg (R., Mont.) put the ban in an amendment to a budget bill funding the federal government through the remaining months of fiscal 2011. "We wanted to create jobs. You wasted time on the health-care reform," Mr. Rehberg said on the House floor, addressing Democrats. A vote on the amendment by the Republican-led House was expected later Friday.
The Battle of Madison, Wisconsin. Walter Mead, one of the shrewdest political commentators on the web, looks at what is happening in Madison, Wisconsin (and elsewhere) and argues that the foundations of what he calls "the blue social model" are crumbling before our eyes. Mead writes:
Obama Administration Asks Judge to Tell The States That Healthcare Law Isn't Optional. The Obama administration is asking a federal judge who struck down the healthcare reform law to clarify that states must still implement the overhaul as the appeals process plays out. Some states are saying the Jan. 31 ruling relieves them from implementing the sweeping reform law because the federal judge in Florida found it to be unconstitutional. The Obama administration, in a Thursday evening filing in a Northern Florida federal court, is asking the court to clarify that the 26 states who successfully challenged the law are still required to comply with it.
Reuters:
JPMorgan(JPM) Says Lehman Called Assets "Goat Poo".Lehman Brothers and Barclays deceived JPMorgan Chase & Co with bad assets that the failed investment bank's own employees dubbed "goat poo," according to new court papers that escalate a legal battle between the financial firms. JPMorgan filed new court claims in the case, contending that Lehman left it with $25 billion in unpaid loans secured by undesirable assets like those left out of the sale to Barclays.
'Flash Crash' Panel Calls for US Market Overhaul. U.S. regulators should stem the growing tide of anonymous stock-trading and consider charging high-frequency traders for their disproportionate amount of buy and sell orders, said a panel of experts advising how to avoid another "flash crash." The panel's 14 recommendations for U.S. securities and futures regulators contained some bold ideas that, taken together, would overhaul the high-speed electronic trading market. The advisers on Friday told regulators that today's markets can easily breed uncertainty among investors, and asked them to move urgently on the suggestions.
Developed Market Equities Shine Again - EPFR. Investors pushed further into developed market equities in the week ended Feb. 16, focusing on the brightening prospects for economic growth and robust corporate earnings, data-trader EPFR Global said on Friday. "Investors are, for the first time since 2007, seeing more opportunity in developed market equities than in emerging markets," Brad Durham, EPFR Global managing director said in a statement. Overall, equity funds posted collective inflows of $8.39 billion compared with $1.16 billion for bond funds. Money market funds recorded outflows of $3.73 billion for the week, EPFR said. Emerging market equity funds had net outflows of $5.45 billion in the latest week for the fourth consecutive reporting period, while emerging-market debt funds had their worst week since late in the fourth quarter of 2008. According to EPFR's data, investors have put a net $47 billion, year-to-date, into developed market equity funds. That contrasts with the net redemptions in the same periods of $28 billion in 2009 and $17 billion in 2010. U.S. equity funds have inflows so far in 2011 above $29 billion, "with retail investors committing fresh money for the seventh week in a row."
Commodity speculators and not market demand is behind the rising price of food, Poland's Agricultural Minister Marek Sawicki said in an interview. Current price developments don't accurately reflect what is happening in agricultural markets, Sawicki said.
G-20 Stung by Faster Inflation as Dispute Rages on Imbalances. Group of 20 policy makers, at odds over smoothing over global economic imbalances, confront a new threat as higher inflation ripples from emerging markets to advanced economies. A report of greater-than-expected U.S. inflation yesterday followed a jump in the European cost-of-living index to a two- year high and a pickup in Chinese prices, further fraying a tentative global consensus over how to sustain the recovery. “We clearly need to keep inflation at bay,” French Finance Minister Christine Lagarde, host of today’s G-20 meeting in Paris, told Bloomberg Television’s Francine Lacqua. “Too much inflation is not going to be conducive to growth."
Libya's 'Day of Anger' Protest Reported to Leave at Least 19 People Dead. Libya’s “Day of Anger” protests against Muammar Qaddafi, in power for 41 years, led to clashes with pro-government forces in which at least 19 people were reported killed. An opposition website and an anti-Qaddafi activist said violence broke out during marches yesterday in five Libyan cities, according to the Associated Press. The 19 deaths were in the second- and third-largest cities, Benghazi and Beyida, according to Al Arabiya television. An opposition website said some demonstrators were killed by snipers from the internal security forces, according to AP. There is an absence of independent reporting due to Libya’s tight press restrictions.
U.S. Credit-Default Swaps Approach Year Low on Economic Data. The cost of protecting U.S. investment-grade corporate bonds from default approached a one- year low as an index of U.S. leading indicators rose in January and manufacturing in the Philadelphia region accelerated. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 1.2 basis points to a mid- price of 79.3 basis points as of 5:02 p.m. in New York, according to index administrator Markit Group Ltd.
Fed's Hoenig Says Farmland Boom May Be 'Unsustainable Bubble'. Federal Reserve Bank of Kansas City President Thomas Hoenig said soaring farmland prices may be the result of an unsustainable bubble that could damage the U.S. economy when it bursts. “My nagging concern remains that current distortions in financial markets are increasing the risk that imbalances in asset markets will catch agriculture -- and the U.S. economy more generally -- by surprise once again,” Hoenig told the Senate Agriculture Committee today, according to his prepared testimony. Hoenig spoke after a report today from the Chicago Federal Reserve showed Midwest farmland values rising 12 percent in the fourth quarter from a year earlier. In Hoenig’s district, the Kansas City Fed has recorded cropland prices nearly 20 percent above year-earlier levels in Kansas and Nebraska, Hoenig said. “This run-up in farmland values has occurred, however, amid financial markets characterized by high levels of liquidity and unusually low interest rates,” he said. “It is nearly impossible to determine how much of the farmland boom may be an unsustainable bubble driven by financial markets and how much results from fundamental changes in demand and supply conditions.” Hoenig said that an increase in borrowing costs could cause a drop in land prices. “Rising interest rates often coincide with falling farm revenues and higher capitalization rates, a depressing combination for farmland values,” he said. “Even if crop prices remain high but capitalization rates return to their historic average, farmland values could fall by as much as a third.”
Debit-Card 'Swipe' Fee May Be Delayed as Lawmakers Assess Industry Impact.A proposed cap on debit-card ‘swipe’ fees scheduled to take effect in July may be delayed or revised amid questions about its impact raised by the financial industry, regulators and lawmakers. Federal Reserve Chairman Ben S. Bernanke, Fed Governor Sarah Bloom Raskin and Federal Deposit Insurance Corp. Chairman Sheila Bair, who testified at two congressional hearings today, aired concerns that could slow down the schedule for implementing the new rules.
JPMorgan(JPM) Boosts Dimon's Stock Pay 22% to $17.4 Million. JPMorgan Chase & Co., the second- largest U.S. bank by assets, boosted Chief Executive Officer Jamie Dimon’s 2010 restricted stock payout by 22 percent to $17.4 million. The board awarded Dimon 251,415 restricted shares valued at about $12.1 million based on yesterday’s closing price, according to a filing today with the U.S. Securities and Exchange Commission. He also received 367,377 options valued at $5.3 million, based on Bloomberg calculations. That compares with 195,704 restricted shares valued at $7.95 million and 563,562 options valued at $6.24 million awarded last year for his work in 2009, according to disclosures by the New York-based company. Dimon, 54, may have also received a cash bonus for 2010 as well that hasn’t yet been disclosed. He took a salary of $1 million and gave up bonuses for 2008 after receiving $49.9 million in total compensation for 2007, which included cash and restricted stock bonuses of $14.5 million each. JPMorgan awarded Dimon’s top 15 executives more than $73 million in restricted shares, plus stock options, for their performance in 2010, according to Jan. 21 SEC filings. That compares with $64.2 million in stock granted to his top 16 executives a year ago, filings at the time show.
North Korea May Attack Again in 'Months,' U.S. Says. North Korea may stage another attack “in months and not years,” said Navy Admiral Robert Willard, the top U.S. commander in the Pacific. North Korean leader Kim Jong Il appears to be training his son “on a compressed timeline” in “coercive measures” like the attacks last year that killed 46 sailors on the South Korean Cheonan warship and four people on the island of Yeonpyeong, Willard told a forum sponsored by the Asia Society in Washington today. “We may very well be facing the next provocation in months and not years,” Willard said in remarks that also touched on China and Southeast Asia.
German Banks' Debt Downgraded By Moody's on Restructuring Act. German banks’ subordinated debt securities valued at 24 billion euros ($33 billion) were downgraded by Moody’s Investors Service on the prospect that new legislation will increase the risk of losses among debt holders. “The new regulatory tools allow authorities to impose losses on debt holders without necessarily placing the entire bank into liquidation,” the ratings firm said yesterday in a statement. “Moody’s considers subordinated debt to be most at risk under the new law.”
China January Home Prices Defy Curbs, Rising in 68 or 70 Cities. rose from a year earlier in all but two of the 70 cities monitored by the government, defying property curbs to keep housing affordable. China’s January new home pricesNew home prices in the capital Beijing advanced 6.8 percent in January from last year, while Shanghai climbed 1.5 percent, the statistics bureau said on its website today, initiating a new method of calculating prices. Haikou had the biggest gain, surging 21.6 percent, and 10 cities had increases exceeding 10 percent. “The new data clearly shows home prices are still rising and the government curbs only suppressed transaction volumes,” said Jinny Yan, Shanghai-based economist at Standard Chartered Plc. “The ultimate problem is monetary policy -- the government should at least raise interest rates two more times this year because if the liquidity is not tightened, it would be impossible for home prices to fall.” China stopped releasing national average property prices and changed the methodology of the survey starting this year, the statistics bureau announced Feb. 16, to more accurately reflect price gains.
Wall Street Journal:
Splits Emerge Among Egypt's Young Activists. Egypt's youth activists and opposition leaders are beginning to jockey for position, jousting over their revolutionary credentials and firing off accusations of going soft on the military, as the camaraderie that united them at the height of the uprising is replaced by rough-and-tumble politics.
Spy Feud Hampers Antiterror Efforts. Ties between U.S. and Pakistani intelligence agencies have deteriorated sharply in recent months, compromising cooperation on a range of critical counter-terrorism efforts, including U.S. drone strikes targeting top militant leaders, current and former officials say. Some U.S. officials describe relations between the two spy agencies as the worst since the Sept. 11, 2001 attacks. One senior official said the tensions have cost the U.S. the chance to strike at some senior terrorists in the region.The state of relations, while never perfect, is now alarming counter-terrorism and military officials, who say close cooperation between the Central Intelligence Agency and Pakistan's Inter-Services Intelligence is essential to the campaign against al Qaeda and the war against the Taliban and its allies in Afghanistan.
Wisconsin Union Fight Heats Up. Democratic lawmakers fled the state Thursday in an effort to torpedo a closely watched vote on what would be the nation's first major overhaul of union laws in years, as government workers flooded the statehouse for a third day seeking to block passage of the bill.
Banks Find Loophole on Capital Rule. Some foreign banks are moving to restructure their U.S. operations to avoid one of the most-burdensome requirements of the new Dodd-Frank law. In November, Barclays PLC quietly changed the legal classification of the U.K. bank's main subsidiary in the U.S. so that the unit would no longer be subject to federal bank-capital requirements. Several other banks based outside the U.S. are considering similar moves, according to people familiar with the matter.
Regulators Eye Apple(AAPL) Anew. U.S. antitrust enforcers have begun looking at the terms Apple Inc. set this week for media companies who want to sell their content on its popular iPad and other devices, according to people familiar with the matter.
Banks To Be Among Winners Of OTC Derivatives Overhaul - Report. Banks will be among the biggest winners in the new regime global regulators are writing for the $583 trillion market for privately traded derivatives, while swaps users will see "very little change in overall economics," according to a report released Thursday from Morgan Stanley and consultancy Oliver Wyman. The assessment runs counter to earlier speculation that banks' revenues would suffer in the wake of the overhaul, with regulators trying to break the grip derivatives dealers have on the market and drive prices lower for the benefit of corporations hedging legitimate business risks. Dealers make $30 billion to $40 billion in revenue globally each year making markets in over-the-counter swaps, said Robert Urtheil, partner at Oliver Wyman in Frankfurt, compared with $3 billion to $4 billion each year on exchange-traded futures. While the overhaul may erode margins on OTC contracts by 5% to 10% annually--an estimate based on interviews and analysis of other markets that underwent similar changes--this will likely be offset by increasing volumes resulting from more efficient execution and new entrants, the report added. "The threat that was coming was huge, so we see [banks] as winners, preserving the market structure," said Urtheil. "The effect of regulation will probably not be as dramatic over time."
Mutual Funds' Muni-Debt Prices Are Questioned. The Securities and Exchange Commission is investigating whether some mutual funds have overstated the value of risky municipal bonds that are thinly traded, according to people familiar with the matter. The SEC probe, which is part of the agency's broader effort to investigate possible abuses in the municipal-bond market, comes at a time of concern about financial stresses on municipal borrowers. The agency's concern is that investors in high-yield muni-bond mutual funds could be misled about the true value of their investment, according to people familiar with the matter.
Illinois Pension Bonds to Test Investors' Faith. The first time Illinois tried to bail out its teetering pension fund by borrowing billions of dollars, it ended in disaster. Nevertheless, the state is trying again.
Forbes:
Alaska Governor Refusing to Enact Health Care Law. Alaska Gov. Sean Parnell took a defiant stand against the federal health care overhaul passed by Congress last year, declaring Thursday that he will refuse to implement a law he views as blatantly unconstitutional. Parnell is the latest Republican governor to lash out against the law as the courts weigh the constitutionality of the overhaul. At least half of all states, including Alaska, have sued the government over the health care plan pushed by President Barack Obama.
The Looming Failure of Obamacare, Part 2: Incentives. Last week, I discussed information problems that were fundamental to third-party payer health care systems like Obamacare. By eliminating the prosaic act of shopping, the government has cut themselves off from critical information about the preferences and tradeoffs made by three hundred million Americans. As a result, any attempts to set pricing top-down are doomed to failure, as evidenced by the impossibility of implementing the “doc fix” to change Medicare reimbursement rates for doctors. But eliminating shopping, or the process of individuals making price-value-feature tradeoffs in purchasing medical care, has more downsides than just making pricing impossible. It also creates terrible incentives that have tended to push every single state health care system towards bankruptcy.
While Obama is Spinning, Michigan's Snyder Leads. For those interested in comparing bold leadership to the wishy-washy variety, the release today of Gov. Rick Snyder's first budget is perfectly timed, coming as it does just four days after President Barack Obama gave the federal deficit disaster another big kick down the road. Obama's budget is a fraud. It continues manic deficit spending. The cuts it contains are mostly pretense, while the tax hikes are real and destructive. It avoids the two major threats to the nation's fiscal stability, Social Security and Medicare. And it leaves most of the tough decisions to Republican lawmakers, who will be demonized by the president and his political allies if they dare to make them. It's the work of a president who lacks the courage to lead. It also exposes the reality that Obama's objective is to increase the size and reach of the federal government, not shrink it, and nothing that happened in the November elections will move him off that mission.
Politico:
House Votes to Overthrow 'Czars'. The House voted Thursday to dethrone nine White House “czars.” Republicans successfully added an amendment to the continuing resolution that would leave President Barack Obama’s senior advisers on policy issues including health care, energy and others out of a job. The vote was 249-179. Rep. Steve Scalise (R-La.) offered the amendment that blocks funding for various policy advisers to combat what he called “a very disturbing proliferation of czars” under Obama. “These unappointed, unaccountable people who are literally running a shadow government, heading up these little fiefdoms that nobody can really seem to identify where they are or what they’re doing,” Scalise said Thursday. “But we do know that they’re wielding vast amounts of power.”
Reuters:
Convergys(CVG) May Spark Buyout Interest - Sources. As technology giants and private equity firms look for potential acquisition targets, customer relationship company Convergys Corp may spark renewed interest, several sources familiar with the situation said.
U.S. House Votes to Overturn US FCC Internet Rules. The U.S. House of Representatives voted on Thursday to overturn proposed rules that bar Internet service providers from blocking legal content but give some discretion to ration access for bandwidth hogs. The vote -- which was spearheaded by Republican lawmakers determined to undo a range of Obama administration initiatives -- would block funds to implement rules proposed by the U.S. Federal Communications Commission in December.
Intuit(INTU) Raises Earnings Forecast, Shares Rise. Intuit Inc, the maker of TurboTax and QuickBooks accounting software, reported a profit that beat Wall Street expectations and raised its quarterly earnings forecast, sending its shares up almost 3 percent.
Brocade(BRCD) Beats Street, Shares Rise. Brocade Communications Systems Inc reported quarterly results and outlook that beat Wall Street expectations, sending its shares up 5 percent, despite worries it may experience the same problems afflicting bigger rival Cisco Systems In.
Strong Fertilizer Demand Boosts CF's(CF) Q4 Profit. CF Industries Holdings Inc said quarterly profit spiked due to strong fall fertilizer application, a trend that executives said will continue in 2011.
US Beefs Up Consumer Bureau With Wall Street Veterans. The U.S. Treasury said on Thursday that it hired former Wall Street veterans from Deutsche Bank(DB) and Morgan Stanley(MS) to help establish its new Consumer Financial Protection Bureau.
Private Recovery Can Create Growth Potion. Critics of the UK government calling for new growth strategies miss the point. Growth is not something concocted by the state, like a health potion at the chemist. Our job is important but modest: to create an environment for business to expand, invest and innovate; reviving what John Maynard Keynes called “animal spirits”. Some commentaries assume that achieving financial stability through fiscal discipline is a simple problem. It is not, but tackling it in an orderly way is far better than being dragged kicking and screaming by the bond markets, like some of our European neighbours.
Hindustan Times:
US Announces $150 Million For Egypt to Help With Transition. US has announced $150 million in aid to Egypt in support of its transition process towards democracy following the ouster of President Hosni Mubarak. The Obama administration is also dispatching William Burns, the undersecretary of state for political affairs, and David Lipton, a senior White House adviser on international economics, to Egypt next week to talk with the interim military government on the issues related to transition. An announcement in this regard was made by Secretary of State Hillary Clinton after she briefed the US lawmakers in a classified setting on the current situation in Egypt after the fall of the Mubarak regime. "It's very clear that there is a great deal of work ahead to ensure an orderly democratic transition. It's also clear that Egypt will be grappling with immediate and long-term economic challenges," Clinton told reporters. The United States stands ready to provide assistance to Egypt to advance its efforts, she added. "I'm pleased to announce today we will be reprogramming $150 million for Egypt to put ourselves in a position to support the transition there and assist with their economic recovery. These funds will give us flexibility to respond to Egyptian needs moving forward," she said.
Nikkei:
Japan will raise its assessment of the economy in a monthly report next week, noting improvement in exports and production.
Shanghai Daily:
About 29% of Shanghai people say they received a pay increase in 2010, and 61% said they expect a raise this year, citing the Shanghai Statistics Bureau. Fewer than 10% of people were satisfied with their salaries, with 33% "not content" and 34.4% "very dissatisfied."
Evening Recommendations Citigroup:
Reiterated Buy on (H), raised estimates and boosted target to $59.
Reiterated Buy on (TER), raised estimates, boosted target to $24.
Night Trading
Asian equity indices are -.50% to +1.75% on average.
Asia Ex-Japan Investment Grade CDS Index 105.50 -1.0 basis point.
Asia Pacific Sovereign CDS Index 118.0 -3.0 basis point.
The Fed's Bernanke speaking and Treasury's Geithner speaking could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 79.78 -.21%
European Financial Sector CDS Index 127.50 bps -.26%
Western Europe Sovereign Debt CDS Index 174.0 bps -.48%
Emerging Market CDS Index 217.24 -1.52%
2-Year Swap Spread 20.0 unch.
TED Spread 22.0 +2 bps
Economic Gauges:
3-Month T-Bill Yield .09% -2 bps
Yield Curve 281.0 +3 bps
China Import Iron Ore Spot $191.90/Metric Tonne unch.
Citi US Economic Surprise Index +72.10 +8.2 points
10-Year TIPS Spread 2.29% +1 bp
Overseas Futures:
Nikkei Futures: Indicating +39 open in Japan
DAX Futures: Indicating +6 open in Germany
Portfolio:
Higher: On gains in my Ag, Biotech, Medical, Retail and Tech long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades at new multi-year highs, despite recent equity gains, global inflation concerns, rising Mideast unrest and mixed economic data. On the positive side, Education, Homebuilding, Construction, HMO, Hospital, Medical, Networking, Semi, Steel and Oil Service shares are especially strong, rising more than 1.0%. Small-Cap and cyclical stocks are outperforming. Tech shares are also outperforming again today, despite (AAPL) weakness. Copper is rising +.78%. The 10-year yield is falling -4 bps to 3.57% despite recent "hot" inflation readings, a very strong Philly Fed report and intensifying concerns over the US budget deficit. The US Muni CDS Index is dropping another -1.57% to 165.43 bps, which is also a large positive. The Citi US Economic Surprise Index is now at the highest level since Sept. 4th 2008. Singapore Electronics Exports grew +5.8% yoy in January versus a -1.1% yoy decline in Dec. On the negative side, Bank, Disk Drive, Computer and Airline shares are lower on the day. (XLF) has underperformed throughout the day. The UBS-Bloomberg Ag Spot Index is rising +1.68% and gold is rising .73%. The Saudi sovereign cds is jumping +4.08% to 126.24 bps and the Israeli sovereign cds is climbing +3.51% to 146.09 bps. Oil is beginning to gain a little upside traction, rising +1.48%. Further near-term gains are likely ahead of a three-day weekend with Mideast unrest spreading. The TED spread has broken out of its multi-month range and is now at the highest level since Aug. 11th, 2010. US equities remain extraordinarily resilient to any potential headwinds as they continue their slow grind higher. I expect US stocks to trade mixed-to-higher into the close from current levels on earnings optimism, US fund inflows, falling long-term rates, buyout speculation, technical buying and short-covering.
