Tuesday Watch

Evening Headlines
Bloomberg:

• Spain Faces Call for Deeper Deficit Cuts as Juncker Calls Rajoy Plan Dead. European governments prodded Spain to make deeper budget cuts in a first test of stiffer fiscal rules designed to prevent the region’s debt crisis from flaring back up. Ten days after new Prime Minister Mariano Rajoy unilaterally raised the Spanish deficit target for this year, European finance chiefs called on Spain to prune an additional 0.5 percent of gross domestic product out of the 2012 budget. Rajoy’s goal of a deficit of 5.8 percent of GDP in 2012 “is dead,” Luxembourg Prime Minister Jean-Claude Juncker told reporters late yesterday after chairing a meeting of euro finance ministers in Brussels. Spain affirmed a target of reaching the euro area’s 3 percent limit in 2013.
  
• Euro Finance Chiefs Give Political Backing to $170 Billion Greek Aid Plan. Euro-area finance ministers signed off on a second Greek bailout, clearing the way for the first payment from the 130 billion-euro package ($170 billion) to be made this month. “The new Greek program is not only in its starting blocks, but has been politically adopted tonight by the euro group,” Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of 17 finance ministers, said in Brussels late yesterday. Euro finance officials will give a formal approval on March 14, a day before the International Monetary Fund board votes on its contribution.
• Soaring Target2 Imbalances Stoke German Risk Angst: Euro Credit. German angst is growing as an entry on the Bundesbank's balance sheet swells to a sum worth about 20% of economic output, a sign of the extent to which Europe's largest economy is funding the region's laggards. The ECB's Target2 system, which calculates debts between the euro region's central banks, shows the Bundesbank is owed $656 billion, up almost 65% from a year earlier. German central bank President Jens Weidmann wrote to ECB President Mario Draghi last month to warn about growing systemic risks. "The Germans are very much justified in their concern," said John Whittaker, an economist at Lancaster University Management School. "The Target2 liabilities are just as risky and just as real as holding the government bonds of Greece and other peripherals."
• Pakistan Tells White House to Stop Drone Missions After Disputes Fray Ties. Pakistan has told the White House it no longer will permit U.S. drones to use its airspace to attack militants and collect intelligence on al-Qaeda and other groups, according to officials involved in the talks. U.S. officials, speaking on condition of anonymity because the drone program is classified, called the use of unmanned aerial vehicles such as San Diego-based General Atomics’ MQ-1 Predator and its MQ-9 Reaper a critical element in the Obama administration’s anti-terrorism strategy. Eliminating drone missions would “contribute to a resurgence of extremist groups operating in the tribal areas” along Pakistan’s border with Afghanistan, Peter Singer, author of “Wired for War: The Robotics Revolution and Conflict in the 21st Century,” said in an interview.
• Ore-Shipping Cost Seen Falling to Decade Low as China Cuts Target: Freight. Rates to ship iron ore, the second- biggest cargo after oil, are poised to drop to the lowest level in a decade after China cut its growth target, signaling weaker demand from the world’s biggest buyer of the commodity. Capesizes, each hauling about 170,000 metric tons of ore, will earn an average of $13,000 a day this year, the least since 2002, according to the median of 10 analyst forecasts compiled by Bloomberg. That’s 13 percent less than the median in January. Shares of New York-based Genco Shipping & Trading Ltd. (GNK), which operates nine of the vessels, will drop 19 percent in the next 12 months, the average of 11 estimates showed.
• Gillard's Labor Party Sinks in Poll as Mining Tax Vote Looms. Australian Prime Minister Julia Gillard’s Labor party sank to a six-week low in an opinion poll as the government, trying to recover from a leadership fight, seeks to pass into law an unprecedented tax on mining profits. Labor’s 31 percent trails opposition leader Tony Abbott’s coalition by 12 percentage points, compared with a 10-point margin in the previous survey, according to a Newspoll published in today’s Australian newspaper.
• Leukemia No Longer a Death Sentence as 90% of Children Live, Study Shows. Five-year survival rates for children diagnosed with acute lymphoblastic leukemia, the most-common type in the young, rose to 90 percent in the years 2000 to 2005 from 84 percent in 1990 to 1994, according to research today in the Journal of Clinical Oncology. Survival increased for all groups of children, except for infants 1-years-old and younger, the study said.
• Obama's Stimulus Helped Grow Debt, Not Economy: Ramesh Ponnuru.
• U.S. Will Ask for WTO's Help to Fight Chinese Curbs on Rare-Earth Exports. The U.S. will ask the World Trade Organization today to intervene with China over Chinese limits on exports of rare-earth materials used in high-tech products, according to an Obama administration official. The U.S. will join Japan and the European Union in asking the trade arbiter to begin consultations with China over its rare earths shipments, the administration official said yesterday in Washington, speaking on condition of anonymity ahead of the White House announcement. Rare earths are 17 chemically similar metallic elements used in making batteries, electric cars and wind turbines. The U.S. will argue that China’s curtailment of the exports has given the nation’s companies an unfair advantage by increasing production costs for American firms, the official said.

Wall Street Journal:

• Evergreen Solar to Abandon Massachusetts Factory. Evergreen Solar Inc. said it has failed to find a buyer for its Devens, Mass., plant and plans to walk away from the facility, which was launched with some $50 million in state aid. The company asked a bankruptcy judge for permission to abandon the property before a $543,000 property tax bill comes due.
• The New Cable-TV Guy: Intel. Chip Maker Working on a Web-Based Video Service to Compete With Cable, Satellite Providers.
• MF Global's Collapse Tars CME(CME) Chief's Exit. CME Group Inc.'s Chief Executive Craig Donohue will retire at year's end, in a surprise change at the world's largest futures-exchange operator as it wrestles with fallout from the collapse of brokerage MF Global Holdings Ltd.
• Fed Fights Subpoena on Bernanke. The Federal Reserve is fighting a subpoena from lawyers in a civil lawsuit who want the central bank's chairman, Ben Bernanke, to testify about conversations he had with Bank of America Corp. executives before the lender completed its purchase of Merrill Lynch & Co. The three-year-old class-action suit alleges that the Charlotte, N.C., bank and Kenneth D. Lewis, then its chief executive, misled shareholders about ballooning losses at Merrill before the $19.4 billion acquisition was approved.
• California's Greek Tragedy. No one should write off the Golden State. But it will take massive reforms to reverse its economic decline.

Business Insider:

• Obama's Approval Rating Is Now In Total Freefall. (graph) New CBS/NYT poll puts Obama's approval rating at 41%... his lowest level ever in the series. Freefall.
  
• Kyle Bass Explains Why He Had The University of Texas Take Physical Delivery of $1 Billion in Solid Gold. (video)
• In A Bid To Change The Italian Economy, Mario Monti Is Fighting The Cab Drivers.
• 84% of Actively Managed Mutual Funds Did Worse Than Their Benchmarks In 2011.
  

Zero Hedge:

• As US Rakes Largest Monthly Deficit In History, 2012 Tax Revenues Net Of Refunds Trail 2011. (graphs)
• Fed To Take Propaganda To The Schoolroom: Will Teach Grade 8-12 Students About Constitutionality Of... The Fed.
• After Greece, Here Are The Four Things That Keep Bank Of America(BAC) Up At Night.
  

CNBC:

• Sentiment in Homebuilders 'Gone Wild', Pros Say Steer Clear.
• Fed Unveils Doomsday Scenario for Banks. The Federal Reserve released its "worst-case scenario" bank stress test criteria Monday and said it will release full results Thursday at 4:30 p.m. ET.

Housing Wire:

• U.S. Subprime Mortgage Performance Weakens on Soft Home Prices. Declining home prices weakened the performance of U.S. subprime residential mortgage-backed securities collateral over the past three years, Fitch Ratings said. Fitch said changes in the remaining collateral backing the securities and an environment of falling home prices are weighing on the loans' overall performance.

Rasmussen Reports:

• Generic Congressional Ballot: Republicans 44%, Democrats 38%.

Reuters:

• Yahoo(YHOO) Sues Facebook(FB) for Infringing 10 Patents. Yahoo Inc sued Facebook Inc over 10 patents that include methods and systems for advertising on the Web, opening the first major legal battle among big technology companies in social media. The lawsuit, filed in a San Jose, California federal court on Monday, marks a major escalation of patent litigation that has already swept up the smartphone and tablet sectors and high-tech stalwarts such as Apple Inc, Microsoft Corp and Motorola Mobility Holdings Inc.
• Urban Outfitters(URBN) Sees More Full-Priced Sellings. Urban Outfitters Inc said it was selling more merchandise at full prices, cheering investors after a holiday season during which the clothing retailer resorted to steep discounts in an attempt to clear inventory. The company's shares, which had crossed the $40 mark about two years ago and since then have lost nearly a quarter of their value, jumped to $31 in after-market trade. They had closed at $29.51 on Monday on the Nasdaq.

Financial Times:

• Spain Pressed To Cut More From Its Budget. Eurozone finance ministers called on Spain to make new cuts in its 2012 budget to reduce its deficit by another 0.5 per cent of economic output, a stinging rebuke to the new government of premier Mariano Rajoy, which publicly flouted Brussels-imposed deficit targets less than two weeks ago. Despite the new cuts, Madrid will still be allowed to breach a previously agreed deficit limit of 4.4 per cent of gross domestic product this year by nearly a full percentage point; its new target will be 5.3 per cent, according to a senior eurozone official.
• Few Hedge Funds Gain in Greek Bond Saga. It was a high-risk, speculative bet in Greece’s tumultuous bond market: a wager that would pay off if the Greek government faltered in its landmark bond restructuring at the final hurdle. The gamble was thought to have been popular among the hedge fund denizens of well-healed Mayfair and leafy Connecticut – that Greece would be forced into an embarrassing repayment of its €14.4bn March 20 bond.

Telegraph:

• Chairman of the Treasury Select Committee Calls for Greece to Exit the Euro. Andrew Tyrie, chairman of the Treasury Select Committee, tonight called for Greece to exit the euro and for the resources of the International Monetary Fund (IMF) to be significantly boosted to tackle future financial crises.

Financial Times Deutschland:

• The European Commission plans to demand the U.S. government cut subsidies to Boeing Co.(BA) within six months, citing people in the aviation industry. The demands include canceling some NASA research projects, U.S. Defense Department projects for civil aviation, as well as some state subsides for Boeing plants.

China Securities Journal:

• The People's Bank of China, the National Development and Reform Commission and five other government agencies called for a stable lending policy for first-home buyers in a joint report. The government will crack down on any attempt to avoid home purchase restrictions, the report said.

Shanghai Securities News:

• Chinese local governments must explain measures for repaying debt when applying to the National Development and Reform Commission to sell municipal bonds. Municipal bond underwriters must provide opinions on issuers' guarantees on debt repayment.

Evening Recommendations
Citigroup Global Markets:

• Reiterated Buy on (NFLX), target $130.
• Rated (IPCM) Buy, target $43.

Stifel Nicolaus:

• Rated (IEX) Buy, target $49.
• Rated (ETN) Buy, target $59.

Night Trading

• Asian equity indices are +.25% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 155.50 -3.5 basis points.
  
• Asia Pacific Sovereign CDS Index 127.50 +.5 basis point.
• FTSE-100 futures +.68%.
  
• S&P 500 futures +.49%.
  
• NASDAQ 100 futures +.47%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FDS)/1.12

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for February is estimated to rise to 94.5 versus 93.9 in January.
  

8:30 am EST

• Advance Retail Sales for February are estimated to rise +1.1% versus a +.4% gain in January.
• Retail Sales Less Autos for February are estimated to rise +.7% versus a +.7% gain in January.
• Retail Sales Ex Auto & Gas for February are estimated to rise +.5% versus a +.7% gain in January.

10:00 am EST

• Business Inventories for January are estimated to rise +.5% versus a +.4% gain in December.

2:15 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .25%.
  

Upcoming Splits

• (RES) 3-for-2
  

Other Potential Market Movers

• The IMF Meeting on Greek Bailout, Greece/Italian Bond Auctions, ECB's Draghi speaking, 10Y T-Note Auction, weekly retail sales reports, IBD/TIPP Economic Optimism Index for March, JOLTs Job Openings for January, CFTC final rule on swap data, (EPL) analyst day, (CVX) analyst meeting and the (APC) investor conference could also impact trading today.
  

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Slightly Higher into Final Hour on Euro Bounce, Lower Energy Prices, Short-Covering, Investor Performance Angst

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 16.05 -6.20%
  
• ISE Sentiment Index 110.0 +18.28%
  
• Total Put/Call 1.05 +16.67%
  
• NYSE Arms 1.23 +6.77%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 95.71 +.89%
  
• European Financial Sector CDS Index 172.98 +4.36%
  
• Western Europe Sovereign Debt CDS Index 358.76 +2.04%
  
• Emerging Market CDS Index 237.95 -.45%
  
• 2-Year Swap Spread 25.75 -.25 bp
  
• TED Spread 39.75 -.25 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -63.50 +2.25 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 171.0 unch.
  
• China Import Iron Ore Spot $143.30/Metric Tonne +.49%
  
• Citi US Economic Surprise Index 38.30 -.7 point
  
• 10-Year TIPS Spread 2.29 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -16 open in Japan
• DAX Futures: Indicating +15 open in Germany

Portfolio:

• Higher: On gains in my Tech, Retail and Medical sector longs
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 trades near recent highs despite high energy prices, rising Eurozone debt angst and rising global growth fears. On the positive side, Utility, and REIT shares are especially strong, rising more than +.75%. Oil is falling -.88% and Gold is down -.69%. On the negative side, Coal, Oil Service, Steel, Semi, Networking, Hospital, HMO, Construction, Education and Airline shares are under pressure, falling more than -1.0%. Lumber is down -.92%, Copper is down -.39% and the UBS-Bloomberg Ag Spot Index is rising +.29%. The Transports have lagged throughout the day. The 10Y T-Note Yield at 2.03%, remains a concern considering the recent stock rally, falling Eurozone debt angst and improvement in US economic data. As well, the Philly Fed/ADS Real-Time Business Conditions Index is down -14.0% over the last 5 days and continues to trend lower from its mid-December peak. Lumber is -5.0% since its Dec. 29th high despite the better US economic data, more dovish Fed commentary, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the weekly MBA Purchase Applications Index has been around the same level since May 2010. The Baltic Dry Index has plunged over -60.0% from its Oct. 14th high and is now down around -50.0% ytd. The Western Europe Sovereign CDS Index is breaking back above its 50-day moving average for the first time since December and is only 28.0 bps away from its all-time high set on Jan. 9th. Overall, credit gauge improvement has stalled over the last few weeks and these gauges are still at stressed levels. China Iron Ore Spot has plunged -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are up +705.5% ytd and are still very near their recent all-time high. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. Major Asian indices were mixed overnight as Taiwan fell -1.10% and India gained +.48%. Major European indices fell around -.5%, led lower by a -1.24% decline in Spanish shares. Spain is now down -4.51% ytd, which remains a red flag for the region. The Bloomberg European Financial Services/Bank Index fell -1.31%. Investors are shunning the new Greek bonds even as yields surge above those seen in Iraq, Venezuela and Pakistan. While the current European “can-kicking” may satisfy politicians’ needs for short-term stability, I continue to believe their recent actions will eventually result in an even more intense debt crisis over the intermediate-term. US stocks continue to consolidate recent gains in a healthy fashion, however investor complacency remains fairly high given the macro backdrop. Volume remains poor, but should pick up later in the week on the FOMC announcement and triple witching. I am still looking for signs that another pullback is developing. For an intermediate-term equity advance from current levels, I would still expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. Two of my longs, (AAPL) and (ISRG), are hitting new highs again today and continues to trade extraordinarily well. While the stocks are extended short-term, I still expect meaningful outperformance for the shares over the intermediate-term. I expect US stocks to trade mixed-to-higher into the close from current levels on a bounce in the euro, short-covering, investor performance angst and lower energy prices.

Today's Headlines

Bloomberg:

• Third Greek Bailout Package Can't Be Exluded, Schaeuble Tells De Morgen. Greece can achieve the goal of cutting debt to 120.5 percent of economic output in 2020 though a third bailout for the nation can’t be excluded, German Finance Minister Wolfgang Schaeuble said in an interview with De Morgen. “Nobody can now exclude that Greece at a single moment may need a third bailout,” the Belgian newspaper quoted Schaeuble as saying. “I have all confidence that the measures that we have taken and that Greece must now implement -- no simple exercise -- will bring the country on the road to recovery.” Schaeuble also said he opposes broadening the European Central Bank’s mandate to something similar to that of the U.S. Federal Reserve, according to De Morgen. “The ECB cannot and must not finance state debt,” Schaeuble said in the interview. “The member states must do that themselves.”
• Portugal Yield at 13% Says Greek Deal Not Unique: Euro Credit. The good news is Greece won’t default on March 20, and 10-year borrowing costs for Spain and Italy have dropped below 5 percent. The bad news is similar- maturity Portuguese bonds still yield more than 13 percent. “The ECB liquidity is life support,” said Robin Marshall, director of fixed income in London at Smith & Williamson Investment Management, which oversees about $18 billion. “They’ve bought time but they must use the time to implement proper reform. It’s hard to see there not being more defaults, more private sector involvement. It makes it more likely we’re going to get another market rout later in the year.”
• Sovereign Bond Risk Rises After Greek Default Swaps Triggered. The cost of insuring against default on European sovereign bonds rose to the highest in eight weeks after the declaration of a credit event triggering $3.2 billion of Greek debt protection contracts. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose four basis points to 355 at 11 a.m. in London, the highest since Jan. 18. Investors are betting against Europe's other troubled economies after the International Swaps & Derivatives Association's ruling bolstered confidence in the market for hedging sovereign bond holdings. "It was always likely that CDS would trigger," said Elisabeth Afseth, a strategist at Investec Bank Plc in London. "Confirmation may be giving bit of confidence that CDS is still useful as a hedge, and you could see the reason someone might want to protect the likes of Portugal on the back of that."
• Greece's College Students Fighting Stray Dogs as Austerity Deepens Despair. “People are pessimistic and sad,” said Konstantinos Markou, a 19-year-old law student, speaking in a lobby at the University of Athens, where dogs fought nearby and students say drug dealers and users congregate. “The sadness is all around the air.”
• Oil Declines on Signs Chinese Economic Growth Will Slow, Cutting Demand. Oil fell for the first time in four days after Chinese economic data signaled slower growth by the world’s second-largest user of crude. Futures dropped from a one-week high after China said on March 10 that the country’s trade deficit in February was the largest in at least 22 years. Government data also showed that China, the biggest consumer of crude after the U.S., had the weakest January-February factory-production gain since 2009 and retail sales below expectations. “The market is taking a hard look at what the situation is on the ground in China,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Their economic activity is very much in question.” Crude for April delivery declined $1.16, or 1.1 percent, to $106.24 a barrel at 1:10 p.m. on the New York Mercantile Exchange. Oil ended at $107.40 a barrel on March 9, the highest settlement since March 1. Prices are up 7.5 percent in 2012. Brent oil for April settlement on the London-based ICE Futures Europe exchange slid 87 cents, or 0.7 percent, to $125.11.
• Pandit Pay Climbs Toward $53 Million as Citigroup(C) Slumps. Citigroup Inc. (C), the second-worst performer in the KBW Bank Index (BKX) last year, is grappling with a revenue slump. Chief Executive Officer Vikram Pandit is not. Pandit’s $15 million pay package for 2011 and a multi-year retention package announced in May could total $53 million, based on regulatory filings and an analyst’s estimate. The CEO also received $80 million last year from the New York-based firm’s purchase of his Old Lane Partners LP hedge fund in 2007.

Wall Street Journal:

• Baker Hughes(BHI) Joins BP(BP), Schlumberger(SLB) On Talks to Upgrade Iraq Kirkuk Oil Field - Source.
• Four Veteran Ex-OPEC Oil Ministers Set Up Energy Alliance. Four former oil ministers of OPEC member states Iraq, Libya, Algeria and Nigeria have set up an international energy alliance to tackle various energy issues, the four said in an announcement late Sunday.
• French Authorities Reject Finance Pact. France's local authorities have refused to sign a stability pact with the government to help shore up the country's finances, said French Budget Minister Valérie Pécresse Monday.
• Angola Oil Minister Says Return to 2008 Oil Prices Could Endanger Economy. A return to oil prices not seen since 2008 could endanger the global economy, Angola's oil minister said Monday, the latest crude producer to acknowledge Middle-Eastern tensions may be pushing oil futures too high.
  

CNBC.com:

• High Gas Prices Threaten Stock Market Gains: Report. If history is any indication, the stock market could soon lose the resilience it has shown so far in the face of soaring oil and gasoline prices, says a new report from Morgan Stanley.
• Romney Hits Obama on Jobs. A day before two Southern primaries, Mitt Romney campaigned in Alabama on Monday, his 65th birthday, talking of eating catfish and hunting and appearing with comedian Jeff Foxworthy, famous for his "redneck" jokes.

Business Insider:

• The Chinese Housing Bust in 3 Huge Slides.
• The Mobile Gold Rush Is Not Even Close To Peaking.
• Brand New Numbers: Here's Who's Footing The Bill For Greece's Default.
• Obama's Poll Ratings Are Tanking Again. Obama's poll ratings are falling, and he's looking weak against his Republican opponents. That's the gist of a new WaPo/ABC poll. In the new poll, 46 percent approve of the way Obama is handling his job; 50 percent disapprove. That’s a mirror image of his 50 to 46 positive split in early February. The downshift is particularly notable among independents — 57 percent of whom now disapprove — and among white people without college degrees, with disapproval among this group now topping approval by a ratio of more than 2 to 1, at 66 versus 28 percent. These groups are also the ones whose shifting support has re-shuffled prospective general-election matchups. Among registered voters, Obama is now on par with Romney (47 percent for the president, 49 percent for Romney) and Santorum (49 to 46 percent). Previously, Obama held significant advantages over both.

Zero Hedge:

• The Greek PSI Lawsuits Begin.
• Mark Grant on the Increased Risks of Owning European Sovereign/Bank Debt.
• Market Shorts at 4 Year Lows, In Hibernation for Second Straight Month. (graph)
• Is The ECB Masking Accelerating Deposit Flight In Italy and Spain?
  

New York Times:

• Report Shows Depth of the Distress in Europe. While the European Central Bank’s emergency loan program late last year helped avoid a banking crisis, there is doubt over whether the action will promote economic growth by encouraging lending to businesses and consumers, according to a new report by the Bank for International Settlements.

Reuters:

• Copper Snaps 3-Day Rally as China Concern Weighs.

Telegraph:

• Forget 'Economic Spring' - Greek Outlook is Stormy. While last week's debt swap was obviously important, there is still a very real danger of Greece needing yet another bail-out quite soon and eventually leaving the euro.

Financial Post:

• High-Yielding New Greek Bonds Fail to Lure Investors. Investors shied away from new, post-swap, Greek bonds on their first trading day on Monday, as some of the highest yields in the government debt universe were not enough to offset fears of another default or a euro zone break-up. Investors demanded yields of between roughly 14 and 19 percent to buy the new bonds. Unusually, yields on the paper maturing earlier were higher than on longer-term debt. This inversion can indicate investors fear a default. Exotix, a brokerage firm specialised in distressed debt, said Greece was the third highest yielding country in the world behind Cyprus in first place and the central American state of Belize. Debt issued by countries that rating agencies view as “highly speculative”, such as Pakistan, Iraq or Venezuela yielded less than the new Greek bonds.

Shanghai Daily:

• Sales and Supply of New Homes in Shanghai Fall. THE sales and supply of new residential properties in Shanghai declined last week, snapping a five-week rally that began from the end of the Spring Festival holiday, according to market data released yesterday. The buying of new homes, excluding government-funded affordable housing, fell 25.8 percent on a weekly basis to 149,400 square meters over seven days ended Sunday, Shanghai Deovolente Realty Co said.

Economic Information Daily:

• China's debt for road construction may have exceeded 5 trillion yuan, citing Li Zhijun, a member of the Chinese People's Political Consultative Conference. Outstanding debt on toll roads was 2.35 trillion yuan at the end of 2010, Li said.
  

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.80%

Sector Underperformers:

• 1) Coal -3.20% 2) Oil Service -2.31% 3) Gold & Silver -1.73%

Stocks Falling on Unusual Volume:

• FSLR, TDW, NGD, SINA, P, IMO, CSOD, IDXX, NICE, RAIL, PAAS, ARII, HITK, GMCR, MASI, ACOM, NIHD, IFSIA and FGP
  

Stocks With Unusual Put Option Activity:

• 1) STI 2) PHM 3) YOKU 4) XLE 5) SOHU
  

Stocks With Most Negative News Mentions:

• 1) ORCL 2) LUV 3) ANR 4) BAC 5) VLO
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Laqrge-Cap Value +.09%

Sector Outperformers:

• 1) Utilities +.65% 2) Drugs +.19% 3) REITs +.17%

Stocks Rising on Unusual Volume:

• ARGN, SZYM, SOHU, YOKU, TUDO, ZOLL, JVA, VELT, TSLA, SODA and SUP
  

Stocks With Unusual Call Option Activity:

• 1) TIF 2) WDC 3) RVBD 4) AEO 5) GPS
  

Stocks With Most Positive News Mentions:

• 1) ZOLL 2) LMT 3) CHRW 4) CVH 5) EFX
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Monday Watch

Weekend Headlines
Bloomberg:

• Greece Deal Triggers $3B in Default Swaps: ISDA. A committee of credit-default swaps traders will expedite an auction to settle about $3 billion of contracts tied to Greece after the nation took steps to force investors to participate in the biggest sovereign-debt restructuring in history. Traders will hold the auction March 19 to “maximize” the number of bonds that can be used to set payout amounts, the New York-based International Swaps and Derivatives Association said on the committee’s website yesterday.
• Monti Targets Italy Labor Law Revamp as Jobless Youth Join Trapped Fireman. Young Italians are the have-nots of a two-tier job market that Prime Minister Mario Monti is seeking to overhaul to boost employment and growth in the euro area’s second most-indebted economy. While mostly older workers enjoy open-ended contracts with strict limits on firing, young laborers often make do with short-term deals that leave them as the first to go when employers cut costs amid Italy’s fourth recession since 2001.
• Portugal Yield at 13% Says Greek Deal Not Unique: Euro Credit. The good news is Greece won't default on March 20, and 10-year borrowing costs for Spain and Italy have dropped below 5 percent. The bad news is similar-maturity Portuguese bonds still yield more than 13%.
  
• German CDU's Kauder Warns Over European Central Bank Cash Policy. A top official in Chancellor Angela Merkel’s party told Wirtschaftswoche he has “mixed feelings” about the European Central Bank handing financial institutions more than 1 trillion euros ($1.3 trillion) in cash. “I hope the ECB recognizes its limits and later collects the money back swiftly,” Volker Kauder, the parliamentary chief of Merkel’s Christian Democratic Union and its Bavarian Christian Social Union sister party, told the Dusseldorf-based weekly magazine in an interview. “Once the European Stability Mechanism is working, many ECB measures won’t be necessary anymore.”
• Germany's Schlesinger Tells Welt Tenders Make ECB 'Inflexible'. Helmut Schlesinger, former president of Germany’s Bundesbank, criticized the European Central Bank’s policy of injecting fresh money into the market in an interview with Welt am Sonntag. The ECB’s most recent tenders in December and February, in which banks were awarded more than 1 trillion euros ($1.3 trillion), made the institution “completely inflexible,” Schlesinger was quoted as saying in an interview to be published by the Berlin-based newspaper tomorrow. “It can really control only 5 percent of the money it has spent.” Schlesinger also said he’s concerned over “giant” imbalances in the bank’s Target 2 securities settlement service, the newspaper said.
• Financial-Transaction Tax for Europe Urged by Schaeuble, Monti in Letter. German Finance Minister Wolfgang Schaeuble is among European leaders calling for a Europe-wide tax on financial transactions, Der Spiegel reported, citing a joint letter to the EU leadership. “We’re convinced that a financial transaction tax should be introduced at the European level,” nine officials including Italian Prime Minister Mario Monti and French Finance Minister Francois Baroin said in the letter to Margrethe Vestager, finance minister of Denmark, which holds the rotating EU presidency. “We would welcome it if the presidency speeds up the negotiation process,” the Hamburg-based magazine cited the letter as saying. Germany’s finance ministry is drafting a proposal for a financial transaction tax affecting revenues from stock and bond sales, currency transactions and derivatives, Der Spiegel said.
• Fed Said to Balk at Bank Payouts Over Loan-Loss Estimates. The Federal Reserve is pushing back against some banks’ proposals to pay dividends and repurchase shares, after concluding that the lenders are underestimating the potential for losses on consumer debt in a severe economic slump, according to two people with knowledge of the situation. Executives and Fed examiners have been wrangling in recent weeks over the central bank’s stress-test process as the March 15 deadline for results approaches. The Fed hasn’t yet given banks a ruling on their proposed payouts or told firms how much higher its estimates are for losses on mortgage loans and credit cards, the people said. Examiners are still fine-tuning calculations, which may change. “If the Fed fights back and disagrees and is more aggressive in their stance on cards and mortgages, it would mean banks wouldn’t be able to pay out as much,” missing investors’ expectations, said Glenn Schorr, a senior bank analyst for Nomura Securities in New York. Investors expect banks will pay out 50 percent to 60 percent of earnings this year, he said.
• Oil Drops From Highest Price in a Week on Concern Economic Growth to Slow. Oil fell from the highest price in more than a week in New York on speculation fuel demand will falter after Chinese export data signaled an economic slowdown. Futures slid as much as 0.5 percent. China had its biggest trade deficit in at least 22 years last month, a March 10 report by the customs bureau showed. Overseas shipments rose 18.4 percent, compared with a median estimate of 31.1 percent in a Bloomberg News survey. “The data from China is a downside pressure on the oil market, said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo. ‘‘The trade deficit is much bigger than expected.’’ Crude for April delivery fell as much as 55 cents to $106.85 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.87 at 10:17 a.m. Tokyo time.
• BRICs Fastest Inflation Accelerating Puts Subbarao on Hold: India Credit. Indian inflation, the fastest among the biggest emerging markets, is poised to accelerate as oil costs rise for a nation that depends on imports for 80 percent of its energy requirements, interest-rate swaps show. The cost of locking in rates for five years rose to 7.49 percent in Mumbai on March 9, the highest in almost five months, according to data compiled by Bloomberg. Wholesale prices rose 6.69 percent last month after increasing 6.55 percent in January, according to the median forecast of economists in a Bloomberg survey before data due on March 14.
• Dow Theory Converging With Bonds as Transports Signal Slowdown. Transportation and industrial shares are diverging in the U.S., a signal that equity investors are starting to agree with what the bond market already knows: this economic recovery will remain sluggish for months to come.
• Unopened China High-Speed Rail Section Collapses After Rains, Xinhua Says. A 300-meter section of an unopened high-speed railway collapsed in central China’s Hubei province following heavy rains, Xinhua News said, citing local authorities. Hundreds of workers have been sent to make repairs following the March 9 failure in Qianjiang city, the report said. The collapsed section is part of the 291 kilometer (181 miles) long Hanyi High-Speed Railway, linking the provincial capital Wuhan and Yichang city, which is due to open in May. China Railway Group Ltd. (390) and China Railway Construction Corp., the nation’s biggest railway-builders, plunged in Hong Kong trading on concerns the collapse may further deter rail construction. The government last year slowed new lines after 40 people were killed in a high-speed crash near Wenzhou in July. China Railway Group dropped as much as 7.4 percent and China Railway Construction fell as much as 7.5 percent. Those were the biggest drops for both companies this year. Trainmaker CSR Corp. fell as much as 6.4 percent, the most since Feb. 10.

Wall Street Journal:

• MF Global Case Rattles World of Futures. The closely knit futures industry has confronted scandals before, but the collapse of MF Global Holdings Ltd. still has seasoned brokers and exchange officials on edge. Confusion over what went wrong at MF Global and how it could have been prevented have prompted some of the world's biggest agricultural trading firms to consider dumping brokerage middlemen and bringing their business in-house, to avoid being caught up in another such debacle.
• ChevronCVX) Plays Catch-Up in Shale Gas. Energy Giant Races to Expand Drilling in Marcellus as Foreign Markets Beckon.
• New Rules Target Offshore Funds. Regulations are prompting some financial advisers to urge their clients to bring money back to the U.S. Owning a portfolio of offshore holdings is about to get much riskier, thanks to new U.S. tax-reporting rules, financial advisers say. As a result, some advisers are urging clients to shift money back to the U.S. The Foreign Account Tax Compliance Act, known as Fatca, will require both U.S. citizens and foreigners living in the U.S. to make extensive disclosures about overseas holdings on their tax returns or risk harsh penalties. Foreign financial institutions also will be required to report more detailed information on income earned by their U.S. account holders, or face possible U.S. tax penalties. The rules start to take effect this year, with additional requirements set to be phased in over the next several years.
• Deal Shows China's Sway in Rare-Earth Minerals. Molycorp Inc.'s(MCP) $1.3 billion deal to acquire a key processor of rare-earth minerals has sparked a warning from industry officials that it could reinforce China as the main source for specialized magnets used in consumer electronics and sophisticated weapons. Molycorp said Thursday it plans to buy Toronto-listed Neo Material Technologies Inc., one of the world's leading experts in chemistry needed to transform rare earths—minerals used in applications that range from car batteries to advanced weaponry—into specialized magnets. Molycorp said the deal creates the most diversified rare-earth company outside of China, which dominates the industry.
• Bond Swap Doesn't End Greek Crisis. Most of Greece's bondholders have bowed to the inevitable. Asked to take part in the biggest sovereign-debt restructuring ever, covering €206 billion ($273.46 billion) of debt, holders of €172 billion of bonds agreed. Collective-action clauses will boost the participation to €197 billion, 96% of the total, triggering credit default swaps. Greece should get its second bailout, and the threat it has posed to global markets should recede. But there are still some loose ends.
• Guangzhou Foreign Land Deals Curbed. Officials in China's southern city of Guangzhou are cracking down on purchases of commercial real estate by foreign buyers, shining a light on another heady corner of the Chinese property market. The crackdown constitutes tougher enforcement of existing laws that forbid foreign individuals from buying retail real estate, a city spokesman and property market experts said. It comes as prices for malls, storefronts and other retail properties have surged in the fast-growing city.
• Shootings Fray Afghan Ties. A U.S. soldier walked off his base in Afghanistan and opened fire on local villagers Sunday, Afghan and U.S. officials said, killing 16 people in a shooting spree that further complicates American efforts to end its longest foreign war.
• As Rivals Divide, Romney Gains. The split among conservatives over which Republican to back for president is bolstering the one candidate many of them don't want: Mitt Romney.
• School Standards Wade Into Climate Debate. After many years in which evolution was the most contentious issue in science education, climate change is now the battle du jour in school districts across the country. The fight could heat up further in April, when several national bodies are set to release a draft of new science standards that include detailed instruction on climate change. The groups preparing the standards include the National Research Council, which is part of the congressionally chartered National Academies. They are working from a document they drew up last year that says climate change is caused in part by manmade events.
• Syria Talks Stall Amid New Strife. A joint United Nations-Arab League mission to broker a cease-fire in Syria faced a deadlock as both President Bashar al-Assad and the opposition rejected immediate negotiations, while the military pounded Syria's restive north and fighting between government and rebel forces roiled much of the country.

Marketwatch.com:

• iPad Preorders Sell Out. Preordering the newest version of the iPad now means that you’ll get the device later than those who wait for in line to buy it in the store beginning Friday.

Business Insider:

• A Much Worse Greek Default Is Yet To Come.
• Two Fresh Warning Signs That Gas Prices Are Starting To Bite.
• Before and After: Unreal Pictures From The Japan Tsunami.
• Mauldin: There Will Be Contagion...
  

Zero Hedge:

• An Open Letter to Jamie Dimon.
• The Fed's Manipulation Of The Market Is Driving TrimTabs' Charles Biderman "Even More Nuts Than He Already Is".
• Youth Unemployment Across Europe. (graph)
• Encumbrance 101, Or Why Europe Is Running Out Of Assets.

CNBC:

• Import Surge Sends China Trade to Decade-Deep Deficit.
  
• Greek Debt Swap could Be Short-Lived Reprieve.
  

Wall Street All-Stars:

• Indicator Update: Focus on Energy Prices.
  

IBD:

• Parametric Technology(PMTC) Has 2nd Chance on Smart Product.

NY Times:

• Got $100,000? Have a Cookie: Banks Try Luring the Top 10%.

Washington Times:

• Egypt Parliament to Consider Cutting Off U.S. Aid. Egypt's parliament has called for a vote on stopping U.S. aid. Sunday’s move by the People's Assembly was sparked by the March 1 departure of six American defendants in a case of 43 employees of nonprofit groups accused of using illegal foreign funds to foment unrest in Egypt. The U.S. threatened to cut off aid to Egypt over the issue. Now the parliament is moving to take the initiative, by voting to reject further American aid. The exit of the Americans kicked off a storm in Egypt, prompting many to accuse the ruling generals of bowing to U.S. pressure and intervening in the work of the judiciary. In Sunday’s session, lawmakers complained the U.S. is disregarding Egypt’s sovereignty. They also called a vote on a no-confidence motion in the government.

Chicago Tribune:

• Ken Griffin Interview: Billionaire Talks Politics and Money. Billionaire investor Kenneth Griffin, founder and chief executive of Chicago-based hedge fund Citadel, arguably is this city's only Wall Street titan. Griffin, 43, who is also an active political donor, doesn't crave the limelight. But we've known a lot more about his financial dealings than his politics. Until now.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).
  

Pittsburgh Post-Gazette:

• Obama's Energy Abyss.

Reuters:

• Investors Back Hedge Funds as Performance Rebounds. Investors ploughed more money into hedge funds over the past month, data from hedge fund administrator GlobeOp shows, as hopes of a resolution to the euro zone debt crisis and a rebound in markets boosted confidence after last year's losses. Net inflows into hedge funds, as measured by the GlobeOp Capital Movement Index, which tracks monthly net subscriptions to and redemptions from hedge funds managing around $174 billion, were 2.1 percent of total assets over the month to March 1. While this was slightly down on last month's 2.22 percent, it is nevertheless the second-highest inflow over the past six months and above the 1.12 percent recorded last March.
• Tens of Thousands of Spaniards Protest Labor Reform. Tens of thousands of Spaniards protested on Sunday against a new labor law which hands more power to employers by making it cheaper to fire workers and easier to restrict wage hikes. The demonstrations were the first since unions called a general strike for March 29 and add to a growing number of street protests against government reforms and spending cuts aimed at putting Spain's finances back on track. Union organizers said as many as half a million people attended the peaceful marches in 60 cities, where protesters beat drums and waved red union flags, although police gave no official estimate. Spain has the highest unemployment rate in the European Union at 23 percent and the government predicts this will hit a record high of 24.3 percent this year.
  

Financial Times:

• SEC Probes Operators' Use of Multiple Markets. The US market regulator has launched a broad investigation into whether exchanges favour large trading companies at the expense of smaller customers. The enforcement inquiries emerged from examinations by the Securities and Exchange Commission of how exchange operators, some of which also regulate their customers, manage conflicts of interest with hedge funds, high-frequency trading groups, banks and asset managers.

The Telegraph:

• Global liquidity peak spells trouble for late 2012. The global liquidity cycle has already rolled over. Assuming that no fresh action is taken, world economic growth will peak within a couple of months and then fade in the second half of the year - with grim implications for Europe’s Latin bloc.

Der Spiegel:

• The German government missed its budget-savings targets for 2011 by more than half, citing calculations by the Cologne-based economic institute IW.
  

Weekend Recommendations

Barron's:

• Made positive comments on (HAR) and (ANN).
• Made negative comments on (MCD).
  

Night Trading

• Asian indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 159.0 +3.0 basis points.
• Asia Pacific Sovereign CDS Index 127.0 +.25 basis point.
• FTSE-100 futures -.35%.
  
• S&P 500 futures -.26%.
• NASDAQ 100 futures -.27%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (URBN)/.29
• (GEOY)/.58

Economic Releases
2:00 pm EST

• The Monthly Budget Deficit is estimated to widen to -$229.0B versus -$222.5B in January.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurogroup meeting of finance ministers, 3Y Treasury Note Auction, (BEAV) Investor Day, Barclays Capital Healthcare Conference, Barclays Capital Internet Conference and the JPMorgan(JPM) Aviation/Transportation Conference 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the week.