Thursday, December 30, 2010

Thursday Watch


Evening Headlines

Bloomberg:

  • GE(GE) Leads $3.19 Trillion in Corporate Bond Sales. Corporate bond sales worldwide topped $3 trillion for a second straight year, led by the highest-ever issuance of junk-rated debt, as borrowers locked in the lowest yields on record.
  • MBIA(MBI) Shares Rise After JPMorgan(JPM), Barclays(BCS) Drop Suit Over Insurance Split. MBIA Inc. shares surged after JPMorgan Chase Bank NA and Barclay’s Bank Plc said they are withdrawing from a lawsuit over the company’s decision to split its insurance unit in two. The bond insurer’s stock rose 8.8 percent to $10.36, the most in the Russell 1000 Index today and its biggest gain since Oct. 14.
  • Rice Prices Soar Most Allowed by Chicago Exchange on Global Supply Concern. Rice futures rose the most allowed by the Chicago Board of Trade on expectations for lower production from Thailand, the world’s biggest exporter, because of flooding. Output from Thailand’s main harvest, which started in October, may drop 5.3 percent, the Office of Agricultural Economics said last week. As of Dec. 16, U.S. export sales in the marketing year that started Aug. 1 were 22 percent higher than a year earlier, government data show.
  • Fed's Dudley Scheduled Meetings With Wall Street, Global Chiefs. Federal Reserve Bank of New York President William Dudley scheduled meetings with top Goldman Sachs Group Inc. and Citigroup Inc. officials in his first days on the job, his daybook showed today. Dudley, a former partner and chief U.S. economist at Goldman, had an appointment to meet that bank’s chairman, Lloyd Blankfein, on Feb. 6, 2009, according to his schedule for 2009 and the first nine months of 2010.
  • Pimco Says U.S. Will Keep Reserve-Currency Status. The U.S. dollar will keep its reserve status in 2011 because China and Europe aren’t developed enough for their currencies to replace it, according to Pacific Investment Management Co., which runs the world’s biggest bond fund. “Rising powers such as China are not yet ready to absorb the $9 trillion in reserve assets the world holds, particularly because their bond markets are immature,” Anthony Crescenzi, a money manager at Pimco in Newport Beach, California, wrote in a report yesterday. “Europe, amid all of its financial woes, isn’t even close to ready to take the mantle.”
  • North Korea Boosts Special Forces, Deploys New Battle Tanks, Yonhap Says. North Korea bolstered the size of its special forces, deployed new battle tanks and increased its focus on unconventional warfare, Yonhap News reported, citing a white paper from the South Korean Defense Ministry. The number of lightly equipped special forces, trained to quickly infiltrate South Korea, increased by 20,000 to 200,000 over the past two years, according to the report, citing a biennial defense paper released in Seoul.
  • U.S. Files New Insider Charges, Says Hedge Funds Got Data. A former Primary Global Research LLC expert-networking consultant was charged by U.S. prosecutors in Manhattan with selling inside information to portfolio managers at three unidentified hedge funds.

Wall Street Journal:
  • Banks Open Loan Spigot. Some big U.S. banks are starting to increase their lending to businesses as demand for loans rises and healthier banks seek to grab customers from weaker rivals. After declining steadily for most of the past two years, the amount of commercial and industrial loans held by commercial banks inched upward during the past two months, according to the Federal Reserve.
  • Obama Bypasses Senate to Fill Posts. President Barack Obama, sidestepping Congress, named the first U.S. ambassador to Syria in nearly six years and a deputy attorney general in recess appointments after the nominations ran into trouble among Republicans. Robert Ford will be sent to Damascus, restoring a top-level presence cut off in 2005 when then-President George W. Bush pulled the ambassador over the assassination of former Lebanese Prime Minister Rafik Hariri. Many Lebanese blamed Syria for ordering the murder, a charge Syria has denied.
  • China Considers Further Rare-Earth Quotas. China is considering issuing export quotas for rare-earth alloys in a bid to further regulate the exports of the minerals used in a variety of high-tech industries, a person close to the discussion of the plan said Tuesday.
  • U.S. Seeks Chief For Financial Consumer Agency. White House adviser Elizabeth Warren and a top lieutenant are quietly asking business and consumer groups for names of people who might run the new Consumer Financial Protection Bureau, people familiar with the matter said. The hunt suggests that Ms. Warren, a lightning rod for some bankers, might not be selected to lead the bureau, a centerpiece of the Dodd-Frank financial overhaul bill that passed this summer. Still, many liberal groups will push to get her in the post. President Barack Obama's choice could signal how he intends to deal with resurgent Republicans in Congress. The feelers to business groups serve as a reminder that any nominee would likely need support from at least seven Republicans in the Senate to win confirmation. Among the names being discussed are Iowa's attorney general, Tom Miller; New York state bank regulator Richard Neiman; and former Office of Thrift Supervision director Ellen Seidman.
  • Big Gas Find Sparks A Frenzy in Israel. Israel is at the center of a gas bonanza that has investors, international oil companies, Israeli politicians and even Hezbollah, Israel's sworn enemy, clamoring for a piece of the action.
  • House Appraisals Under Fire. Home appraisals, which were blamed for being too generous during the housing boom, are now being criticized by some homeowners for being too stingy, preventing them from refinancing or borrowing against their houses. The criticism is being leveled at computerized real-estate appraisals, which depend on models that use prices from home sales and other data to determine the value of a house. Because of the volatility in the housing market, they are underestimating prices, some homeowners, real-estate agents and fee appraisers say.
  • What's In Store for Technology in 2011. Products, Services and Big Developments to Watch for and the Challenges Facing the Major Player.
  • 'Death Panels' Come Back to Life. The FDA's restrictions on the drug Avastin are the beginning of a long slide toward health-care rationing.
CNBC:
  • Bad Year for Buffett-Backed BYD. A missed sales target caps a tough year for shares of BYD, the Chinese electric car company backed by Warren Buffett's Berkshire Hathaway.
MarketWatch:
Business Insider:
Zero Hedge:
IBD:
New York Times:
  • Companies Exempt From Derivatives Rules May Yet Get Hit. The new financial regulations coming out of Washington are packed with exemptions – perhaps none greater than the promise to excuse Shell Energy, United Airlines and thousands of other nonfinancial companies that use derivatives from complying with proposed rules for the shadowy $600 trillion market. But some corporations and even some lawmakers now say the so-called end-user exemption — the provision in the Dodd-Frank financial overhaul law protecting nonfinancial companies from new regulations — could be a fallacy. Although one section of the 2,300-page law exempted the companies from some new rules, another provision could expose them to tough new margin requirements. “The end-user exemption has never been the Holy Grail that other people have thought it was,” said Joel Telpner, a partner at the law firm Jones Day, which represents end users and banks that arrange derivative transactions.
  • John Hancock Tower Sells for $930 Million. The John Hancock Tower, a 62-story glass skyscraper in Boston’s Back Bay, was one of the first real estate trophies to run into trouble when the speculative property boom abruptly ended two years ago.
  • Utilities Seek Fresh Talent for Smart Grids.
CNN Money:
  • Online Holiday Shopping: $30.8 Billion Spent. Holiday shopping online was strong right through Christmas, with consumers spending a record $30.8 billion for the season, according to a research firm report issued Wednesday. Online sales for the 56 days ended Dec. 27 rose 13% from the same period in 2009, according to Reston, Va,-based comScore. There was a 17% year-over-year surge in the week that ended Dec. 26 -- the day after Christmas.
  • Blizzard's Cost to Airlines May Hit $150 Million.
Financial Times:
  • US Fears Faster Iran Nuclear Arms Progress. US officials are worried Iran could use new technology in coming months that would shorten the time needed to reach nuclear weapon status and reduce the scope for diplomacy. Washington is particularly concerned that Tehran might deploy a new generation of centrifuges to enrich uranium, a process that can yield nuclear fuel and weapons-grade material.
China Securities Journal:
  • China won't relax property tightening measures because it will take about two to three years for the government to balance home demand and supply, the Journal said in an editorial on the newspaper's front page.
Financial News:
  • Chinese academic Guo Tianyong said the country has room to raise interest rates once or twice in the first half of 2011. Guo is head of the China Banking Research Center at the Central University of Finance and Economics.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 104.0 unch.
  • Asia Pacific Sovereign CDS Index 103.5 +1.0 basis point.
  • S&P 500 futures -.05%
  • NASDAQ 100 futures +.09%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (GIGM)/.01
Economic Releases
8:30 am EST
  • Initial Jobless Claims for last week are estimated to fall to 415K versus 420K the prior week.
  • Continuing Claims are estimated to rise to 4084K versus 4064K prior.
9:45 am EST
  • Chicago Purchasing Manager for December is estimated to fall to 61.0 versus a reading of 62.5 in November.
10:00 am EST
  • Pending Home Sales for November are estimated to rise +.8% versus a +10.4% gain in October.
11:00 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,850,000 barrels versus a -5,333,000 barrel decline the prior week. Gasoline supplies are expected to rise by +1,500,000 barrels versus a +2,400,000 barrel increase the prior week. Distillate inventories are estimated to fall by -625,000 barrels versus a -589,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.1% versus a -.3% decline the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The NAPM-Milwaukee report and weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

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