• Euro Ministers Reach Agreement on Second Greek Bailout. Euro-area finance ministers reached agreement on a second bailout package for Greece that is vital to staving off a default next month. The deal includes a 53.5 percent writedown for investors in Greek bonds, Luxembourg’s Jean-Claude Juncker, who led the meeting, told reporters early this morning. Debt-swap bonds will have a coupon of 2 percent in 2014, rising to 3 percent in 2015- 2020 and to 4.3 percent after that, he said. Finance ministers haggled into the night in Brussels over the terms of new loans to Greece and a possible contribution by central banks, and leaned on investors to accept bigger write- offs in a bond exchange. Ministers were discussing a Greek debt target of 121 percent of gross domestic product by 2020. European Central Bank President Mario Draghi called the deal “a very good agreement.” Italian Prime Minister Mario Monti said private bondholders agreed to take a bigger writeoff on their Greek debt after “intense” negotiations. The euro surged on news of a deal, rising as high as $1.3293 and trading up 0.1 percent at $1.3262 at 5:30 a.m. in Brussels. European governments need to weld together the program to give enough time for the bond exchange — designed ultimately to write off about 100 billion euros of Greek debt — to go ahead by a mid-March deadline. The target is for the swap offer to run from Feb. 22 to March 9, so the exchange takes place in time for Greece to escape the full 14.5 billion-euro cost of a March 20 bond redemption, German lawmakers were told last week by government officials.
• Merkel as Debt Crisis Iron Lady Bucks German Street on Greek Aid. Angela Merkel is having a Margaret Thatcher moment. Having spent six years in office defying comparison with Britain’s first woman prime minister, Merkel is being likened to Thatcher as she steers Europe’s response to the financial crisis with demands for debt reduction and tighter economic controls. Media including the Frankfurter Allgemeine Zeitung, the newspaper of record in Germany’s financial hub, dub her “Europe’s Iron Lady.” Strengthened by record-low joblessness at home, Merkel has rejected calls to either cut Greece loose from the euro area or ease her conditions for aid. By bucking the German street and steering the middle course, she is gambling that policy makers will continue to prevent a euro meltdown, helping her win re- election next year and match Thatcher’s third term. “If Merkel were to go into elections with a collapsed euro zone she’d have a lot of difficulty winning,” Giles Merritt, head of Friends of Europe, a Brussels-based research group that promotes debate on the European Union, said in an interview. “Finally her statesman side is kicking in.”
  
• Spain Sinks Deeper Into Periphery on Debt Rise. Spain’s debt load is set to double from where it was when Europe’s sovereign debt crisis began, eroding the economic advantages that distinguished it from the region’s periphery and helped shield it from Greek (1004Z) contagion. Finance chiefs meet in Brussels today in the latest effort to save Greece from default. Spain went into the crisis with public debt of 40 percent of its gross domestic product, compared with an average ratio of 70 percent in the euro region. The European Union forecasts its debt will have almost doubled by next year, as Moody’s Investors Service says Spain is losing one of its “key relative credit strengths.” Investors give Spain a discount of just 30 basis points on borrowing for a decade compared with what they charge Italy, down from 200 basis points at the end of last year. Spain’s 10- year yield is 5.18 percent, up 33 basis points since Feb. 1. “Time is working against Spain and that is why deficits have to be brought down sharply before the critical 100 percent debt-to-GDP mark is breached,” said Georg Grodzki, who helps oversee $515 billion as global head of credit research at Legal & General Investment Management in London.
• China January Home Prices Worst in a Year. China’s January home prices recorded their worst performance in at least a year, with none of the 70 cities monitored by the government posting gains as Premier Wen Jiabao reiterated his determination to maintain property curbs. Prices in 47 of the cities fell, while home values in the remaining 23 were unchanged from December, the National Statistics Bureau said in a statement on its website on Feb. 18. New home prices in the nation’s four major cities of Shanghai, Beijing, Shenzhen and Guangzhou declined for a fourth month. None of the cities posted gains in home prices for the first time since the government began releasing at the start of 2011 prices for 70 cities surveyed instead of a national average. China won’t waver on the real-estate controls and efforts to bring prices down to a reasonable level to ensure fairness and stability, Wen said on Feb. 12. “The data wasn’t a surprise as the government maintained its property policies, and home prices will continue to fall till at least the later half of the year,” said Ting Lu, a Hong Kong-based economist at Bank of America Corp. unit Merrill Lynch.
• Apple(AAPL) Partner Foxconn Has ‘Tons of Issues,’ Labor Group Says. The Fair Labor Association, a watchdog monitoring working conditions at makers of Apple Inc. products, has uncovered “tons of issues” that need to be addressed at a Foxconn Technology Group plant in Shenzhen, China, FLA Chief Executive Officer Auret van Heerden said. Van Heerden made the comments in a telephone interview after a multiday inspection of the factory. Apple, the first technology company to join the FLA, said on Feb. 13 that it asked the Washington-based nonprofit organization to inspect plants owned by three of its largest manufacturing partners. “We’re finding tons of issues,” van Heerden said en route to a meeting where FLA inspectors were scheduled to present preliminary findings to Foxconn management. “I believe we’re going to see some very significant announcements in the near future.”
• Speculators Boost Bullish Wagers to Highest Since September: Commodities. Hedge funds increased commodity bets to the highest in almost five months on signs that a rescue plan for Greece and faster U.S. growth will buoy demand as supplies shrink for everything from soybeans to copper. Money managers boosted net-long position across 18 U.S. futures and options by 2.9 percent to 956,313 contracts in the week ended Feb. 14, the most since Sept. 20, government data show. Soybean wagers jumped 29 percent to a five-month high. Silver holdings rose for a seventh straight week, the longest advance in almost three years.
• Democrat Conrad Says Economic Crisis Would Be Prod to Lawmakers on Debt. An economic catastrophe like the debt crisis in Europe or a Middle East conflict may be the only way to get congressional action this year on a broad reduction of the U.S. deficit, Senate Budget Committee Chairman Kent Conrad said. “If Europe tanks and begins to drag us down, it may become an acute situation that requires a response,” Conrad said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “Second possibility is Israel attacking Iran. That could create a big run-up in oil prices. That could have dramatic economic effects and also require a fuller long-term response by the United States.” The North Dakota Democrat, who has been in the Senate since 1987, said he blames lawmakers in both political parties — and the voters who elected them — for intransigence on tax increases, entitlement cuts and other tough choices that last year quashed an effort to craft a 10-year debt-cutting plan.
• Egypt to Put 19 U.S. Citizens on Trial on Feb. 26, MENA Reports. Egypt will start the trial of 43 people, including 19 U.S. citizens, on Feb. 26 for breaking rules on foreign financing of NGOs, the official Middle East News Agency reported, citing a court announcement in Cairo.
• Death Toll Mounts in Syria, Officials Killed. Opponents of Syrian President Bashar al-Assad’s rule stepped up their deadly attacks against government officials as the violence of the past 11 months pushes the country toward civil war. Gunmen killed Syrian Public Prosecutor Nidal Ghazal, Judge Mohammed Ziyadeh and their driver in Idlib, the official Syrian Arab News Agency said. The international community is divided on how to resolve the conflict as the daily death toll mounts. Forces loyal to the president are using tanks and artillery to try to crush a rebellion aimed at toppling Assad’s regime. Syrian government forces killed 27 people across the country yesterday, Al Jazeera reported, citing activists. “I’m worried that Syria is going to slide into a civil war,” U.K. Foreign Secretary William Hague told the BBC’s Andrew Marr show yesterday.
• Iran Stops Oil Shipments to U.K., French Buyers, Ministry Says. Iran halted crude exports to French and British companies, the oil ministry’s news website Shana reported, citing Alireza Nikzad Rahbar, a ministry spokesman. Iran “will give its crude oil to new customers instead of French and U.K. companies,” Rahbar said. The halt followed a warning by the oil minister that the Persian Gulf country might act preemptively ahead of a European Union ban on purchases of Iranian crude planned to start in July, he said without giving further details, according to the report yesterday.
• Japan Trade Deficit Widens to Record as Exports Slump: Economy. Japan posted a record trade deficit in January as the yen’s strength and weaker global demand eroded manufacturers’ profits and slowed the nation’s recovery from last year’s earthquake and tsunami. The gap widened to 1.48 trillion yen ($19 billion) and shipments dropped 9.3 percent from a year earlier as energy imports surged, a Ministry of Finance reported in Tokyo today. Shipments to China, Japan’s largest market, fell 20 percent from a year earlier, the biggest decline since Aug. 2009. Exports to European Union slid 7.7 percent and shipments to the U.S. advanced 0.6 percent.
• Oil Profits Falling Fastest Since Lehman From Exxon(XOM) to Chesapeake(CHK): Energy. Profits for the biggest U.S. energy producers including Exxon Mobil Corp. (XOM) are poised to decline the most since the financial meltdown of 2008-09 as the drilling technique known as fracking collapses natural gas prices. Exxon and Chesapeake Energy Corp. (CHK), which today reports 2011 earnings, will see net income in 2012 slide 7 percent and 10 percent, respectively, according to the mean of analyst estimates compiled by Bloomberg. That would be the biggest drop since 2009 for the companies, the largest U.S. gas producers. While higher global demand for transportation fuels drove up crude prices about 30 percent since 2009, the domestic gas glut is pinching earnings for producers even as it pushes the U.S. toward energy independence. Especially hurt are Chesapeake and ConocoPhillips, which amassed gas assets before the full impact of fracking on supply growth was apparent, said Michael McMahon, a managing director for energy investments at Pine Brook Partners LLC, a private equity firm in New York. “Fracking has opened up vast areas of development on a scale that’s practically overwhelming for the industry,” said William Dutcher, president of Dutcher and Co., an Oklahoma City- based operator of 1,300 oil and gas wells. Oil output from U.S. fields including in shale rock is at a nine-year high and gas production hasn’t been this robust in almost four decades, Energy Department figures show. “Shale has driven the gas price down to where it’s creating economic hardship for producers, especially those that made acquisitions in 2006 and 2007, when gas was so expensive,” Dutcher said.
• Rio(RIO) Sees ‘Volatile’ First-Half Ore Prices on China. Rio Tinto Group (RIO), the second-biggest iron ore exporter, expects prices to remain volatile in the first half as demand slows from Chinese steel mills and the European debt crisis crimps the outlook for global growth. “We believe we’ll go through a period of uncertainty probably in the first six months of the year with volatility, then we see some smoother sailing,” Sam Walsh, the company’s iron ore and Australia chief executive officer, told reporters in Perth. “Trying to resolve the issues in Greece and elsewhere creates an amount of uncertainty. People are holding back waiting for things to be resolved, waiting for the comfort that they can see where the economy will be going.”
• Boomers’ Drug Use Pushes Hepatitis Deaths Past HIV, Study Finds. Deaths attributed to hepatitis in the U.S. rose during the past decade to surpass those from HIV, posing a future public health burden as most people aren’t aware they are infected. The baby boom generation, those born from 1946 to 1964, are the most at risk to the bloodborne virus, said John Ward, director of the Centers for Disease Control and Prevention’s hepatitis division, and an author of the study. “Injection drug use was frequent in this age group, and even one-time exposure to injection drug use carries a high risk,” Ward said in an interview. “Seventy-five percent of the mortality is in this age group, and that mortality is increasing. That’s the sobering facts for the baby boom generation.”

• Fed Writes Sweeping Rules From Behind Closed Doors. The Federal Reserve has operated almost entirely behind closed doors as it rewrites the rule book governing the U.S. financial system, a stark contrast with its push for transparency in its interest-rate policies and emergency-lending programs. While many Americans may not realize it, the Fed has taken on a much larger regulatory role than at any time in history. Since the Dodd-Frank financial overhaul became law in July 2010, the Fed has held 47 separate votes on financial regulations, and scores more are coming. In the process it is reshaping the U.S. financial industry by directing banks on how much capital they must hold, what kind of trading they can engage in and what kind of fees they can charge retailers on debit-card transactions.
• UBS Launches New E-Trading Platform For Credit-Default Swaps. STAMFORD, Conn. (Dow Jones)–Seeing that a pending regulatory overhaul of the $708 trillion private derivatives market will bring down the curtain on the lucrative business of dealing in swaps, UBS (UBS, UBSN.VX) is looking for a new way to stay in the game. In a wholesale shift in how credit derivatives have been traded, the Swiss banking giant has launched an electronic market for credit-default swaps, allowing customers to buy or sell the insurance-like instruments directly with other customers on-screen.
• Ex-Bond Highflier Is Warned by SEC. U.S. securities regulators have warned a former top architect of the structured-finance boom that they are considering civil charges alleging he misled investors in a mortgage-bond deal that imploded, people familiar with the situation said. Alexander Rekeda, who led Japanese bank Mizuho Financial Group Inc.’s charge into the then-red-hot business of U.S. subprime debt in 2006, was warned by the Securities and Exchange Commission in October that he faces the potential charges, according to a regulatory filing.
• Fed Raises Bar For Bank Deals. U.S. regulators eventually gave the green light to the $9 billion merger of Capital One Financial Corp. and ING Direct in a key test of the financial rules-of-the-road since the Dodd-Frank Act. But the Federal Reserve Board may be less accommodating to more-complex medium and large banks, analysts and experts said.
  
• Concerned Scientists Reply on Global Warming. The authors of the Jan. 27 Wall Street Journal op-ed, ‘No Need to Panic about Global Warming,’ respond to their critics.

• Look At All The Other Junk Stuck In The Payroll Tax Cut Extension.
• Leaked Memo Blows The Lid Off Of The Entire Greek Bailout.
  
• Steve Wynn Just Forcibly Ousted The Co-Founder Of Wynn Resorts(WYNN), His Former Best Friend, From The Company.
• Fearing The West, Putin Pledges Biggest Military Buildup Since Cold War.
• The West Is Losing The Chess Game With Iran.
• The Leasing Industry Is Fighting An Accounting Change That Would Expose $1.5 Trillion In Debt.
• Uh Oh: Gas Prices Are Getting Close To The Magic Freak-Out Point.
  

• The Great ECB-OSI Bond-Swap Scam.
• European Insurers: How Long Before Capital Denial Becomes Capital Punishment.
• Presenting The Full Greek Sustainability Analysis – Take It Away German Media.
• Tomorrow and Tomorrow and Tomorrow.
  

CNBC:

• Saudi Arabia Cuts Oil Output, Export: Industry Report. The world’s top oil exporter, Saudi Arabia, appears to have cut both its oil production and export in December, according to the latest update by the Joint Organizations Data Initiative (JODI), an official source of oil production, consumption and export data.
• Bullish Hedge Funds Hike Their Bets in 2012 Rally. Hedge funds are cranking up their bets in equities and credit in 2012′s buoyant markets in the belief that the euro zone, U.S. and Chinese economies will fare better than many were fearing last year.
• Recession Looms as Growth Slows in Developed Countries. Economic growth in developed economies almost ground to a halt in the last three months of 2011, with the U.S. driving what growth there was, according to the Organisation for Economic Co-operation and Development (OECD).
• China Telecom in Deal to Sell iPhone in the Mainland.
  

Wall Street All-Stars:

• S&P 500 Corporate Earnings Update.
  

• Chicago New Condo Sales Plunge More Than 50% in 2011.
• Falcone Sticks With Plan, Hit by Lawsuit. Hedge fund manager Philip Falcone told investors he is sticking by plans to build a national mobile broadband service even as an investor charged in a lawsuit that he deceptively raised billions of dollars that went to the struggling venture.
  

• Impact of Insider Crackdown Spreads. As regulators crack down on inside information, particularly in the US, asset managers say increased scrutiny and prosecutions have made it more difficult to talk to companies and affected equity returns.
• Hedge Funds ‘Have to Try Harder’. Hedge funds are on their final warning with investors, according to research from SEI. Although institutional investors have not yet wavered in their commitment to hedge funds, despite disappointing performance in recent years, they are now likely to be more demanding, both in terms of performance and of transparency.
• Investors Seek Hedge Against Euro Split. Leading investment banks are considering creating currency products that would protect companies and investors in the event of a partial break-up of the euro. Banks report that some clients have asked them to provide a hedging tool that would protect their exposure in countries that reintroduced their national currency. “There’s a lot of interest in this,” said Bernie Sinniah, global head of corporate sales at Citigroup, one of the largest foreign exchange dealers.
• European Union rules set to be approved by ministers tomorrow would force euro-area countries to seek EU approval of their yearly tax and spending budgets before presenting them to their national parliaments for approval, citing a draft of the regulations.
• US Corporates Shy To Offer Guidance. US companies are more uncertain about the future than at any point since the financial crisis, with just one in five of the country’s biggest corporations making any predictions as they published fourth-quarter results. “We’re seeing a marked reluctance from companies to be concrete in their forecasts,” said Christine Short at data provider Standard & Poor’s Capital IQ.

• Made positive comments on (CIT) and (GLW).
• Made negative comments on (HPQ).
  

• Asian indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 158.50 unch.
• Asia Pacific Sovereign CDS Index 133.50 -1.5 basis points.
• FTSE-100 futures unch.
  
• S&P 500 futures +.40%.
• NASDAQ 100 futures +.25%.

• (DTG)/.74
• (MYL)/.50
• (MHS)/1.17
• (GPC)/.83
• (HD)/.42
• (WMT)/1.45
• (BYD)/-.01
• (CBRL)/1.14
• (MDT)/.84
• (SKS)/.14
• (M)/1.65
• (BKS)/.92
• (INTU)/.45
• (FST)/.26
• (CAKE)/.52
• (CHK)/.59
• (CUZ)/.12
• (DELL)/.51
• (KFT)/.57
• (EXPD)/.47

• The Chicago Fed Nat Activity Index for January is estimated to rise to .22 versus .17 in December.

Upcoming Splits

• None of note
  

• The 2Y T-Note Auction, Ecofin Meeting of EU Finance Ministers, (MYL) Investor Day and the Enercom Oil/Gas Services Conference could also impact trading today.
  

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• Large-Cap Value +.59%

• 1) Gold & Silver +2.59% 2) Alt Energy +1.19% 3) Coal +1.18%

• SWC, RIC, AUY, SKS, WYNN, ASIA, DWA, WPRT, PCYC, CHG, PBH, PBT, CHH, SWC, QCOR, CJES, PPO, PCYC, M and RRD
  

• 1) SWC 2) CIEN 3) HUM 4) LEAP 5) NI
  

• 1) BRCM 2) GRMN 3) JEC 4) WYNN 5) ETN
  

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

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• Small-Cap Growth -.41%

• 1) Airlines -6.07% 2) REITs -1.51% 3) Homebuilders -1.30%

• WMT, KLAC, HCN, SAVE, UAL, TSRA, MXWL, Z, CTRP, VVUS, TSRA, CIEN, SHPGY, RYAAY, CALL, MDVN, STMP, SATS, DAKT, ALGT, GILD, REGN, ITRI, TECH, GLNG, WFT, CTGX, RUK, NVE, MOH and CIE
  

• 1) STI 2) ASIA 3) HRB 4) YOKU 5) APC
  

• 1) CTRP 2) KLAC 3) SINA 4) WMT 5) JCP
  

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

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

• VIX 18.31 +2.98%
  
• ISE Sentiment Index 102.0 -27.14%
  
• Total Put/Call .76 -10.59%
  
• NYSE Arms .89 -16.33%
  

• North American Investment Grade CDS Index 97.14 -.13%
  
• European Financial Sector CDS Index 178.23 -.39%
  
• Western Europe Sovereign Debt CDS Index 342.02 +2.02%
  
• Emerging Market CDS Index 253.57 -.52%
  
• 2-Year Swap Spread 29.50 -1 bp
  
• TED Spread 42.0 +.25 bp
  
• 3-Month EUR/USD Cross-Currency Basis Swap -68.50 +1.75 bps
  

• 3-Month T-Bill Yield .07% -1 bp
  
• Yield Curve 174.0 +2 bps
  
• China Import Iron Ore Spot $135.40/Metric Tonne +.22%
• Citi US Economic Surprise Index 61.80 -3.1 points
  
• 10-Year TIPS Spread 2.29 +3 bps
  

• Nikkei Futures: Indicating -5 open in Japan
• DAX Futures: Indicating -31 open in Germany

• Slightly Lower: On losses in my Biotech and Tech sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

Read More

• BOE’s Bean Says Greek Deal Doesn’t Eliminate Risk of Disorderly Outcomes. Bank of England Deputy Governor Charlie Bean said agreement on a second bailout for Greece may not be enough to end the debt crisis and countries in the euro- area periphery must reduce debt and improve competitiveness. “While this morning’s agreement between the Greek government and the euro-area authorities is certainly welcome, there still remains a possibility that events could unfold in a disorderly and damaging fashion at some stage in the future,” Bean said in a speech late yesterday in Glasgow, Scotland. The euro crisis “represents the biggest downside risk” to the U.K.
• A Holldande Win in France Would Rattle Europe: George Magnus. If, as opinion polls suggest, the French Socialist Party’s presidential candidate, Francois Hollande, ousts Nicolas Sarkozy in elections this spring, the euro area may be in for a new wave of instability with far- reaching consequences for financial markets and the euro system itself.
  
• Record Nickel Supply Expanding Glut Thwarts Bull Market Rally: Commodities. Mining companies and refineries are producing more nickel than at any time in history, expanding a glut that threatens to reverse this year’s rally. Production will exceed demand by 45,000 metric tons, a 73 percent jump from 2011, Barclays Capital estimates. That’s equal to 46 percent of stockpiles tracked by the London Metal Exchange. Refined output will rise 12 percent, the most in at least eight years, according to Morgan Stanley. Prices, which rose 8 percent to $20,230 a ton this year, may fall as much as 13 percent to $17,630 a ton by Dec. 31, the median of 11 analyst estimates compiled by Bloomberg shows. With new supply expected from Australia to Madagascar to Brazil, consumption still won’t expand fast enough to absorb the extra metal. Most markets for stainless steel, accounting for 76 percent of nickel demand, remain “depressed,” Deutsche Bank AG said in a report Feb. 15. “We’ll get more and more supply over the course of the year,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “We expect huge surpluses for nickel not only this year, but next year, and probably in 2014. It’s mainly due to an increase in supply, but on the other side the stainless steel industry is facing a tough time.”

• Greece Gets a Stay, With Trouble on the Way. Pact Staves Off Immediate Concerns, but Many Problems Remain Even Under Best-Case Scenarios. No triumphalism accompanied Greece’s bailout and debt-restructuring deal hammered out early Tuesday; the euro zone’s two-year debt crisis has seen too many false dawns. Financial markets were somewhat cheered that months of negotiations aimed at cutting Greece’s heavy debt had reached a resolution, largely putting to rest fears of a chaotic debt default next month. It also removed—at least for the immediate future—the gnawing anxiety that some policy makers in Germany and elsewhere are trying to oust Greece from the euro.
• Plan B for China’s Wealthy: Moving to the U.S., Europe. Surveys and visa numbers show that members of China’s wealthy elite are heading for the exits in search of things money can’t buy in China: cleaner air, safer food, better education for their children. This time last year, Shi Kang considered himself a happy man. Writing 15 novels had made him a millionaire. He owned a luxury apartment and a new silver Mercedes. He was so content with his carefree life in Beijing that he never even traveled overseas. Today, a year later, Mr. Shi is considering emigrating to the U.S.—one of a growing number of rich Chinese either contemplating leaving their homeland or already arranging to do it.
• Citigroup(C) Faces Smith Barney Hit. Citigroup Inc. is facing a potential multibillion-dollar write-down as it begins unwinding its minority investment in the Morgan Stanley Smith Barney brokerage. Morgan Stanley has the right this spring to start buying Citigroup out of the joint venture, which was formed in 2009, when the sides combined Citigroup’s Smith Barney with Morgan Stanley’s wealth-management unit. Price is likely to be one of the main points under discussion when negotiations begin this spring, people familiar with the situation said.
• Obama’s Dividend Assault. A plan to triple the tax rate would hurt all shareholders. President Obama’s 2013 budget is the gift that keeps on giving—to government. One buried surprise is his proposal to triple the tax rate on corporate dividends, which believe it or not is higher than in his previous budgets. Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8%—nearly three times today’s 15% rate. Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.

• George Soros Speaks on China and Other Matters at Davos.

• A New Survey Shows Unemployment Surging Again. (graph)

• IIF’s Dallara Warns Holdout Greek Bondholders Could Kill “Successful” Greek Deal. (video)
• Anonymous Hacks Greek Ministry Website, Demand IMF Withdrawal, Threatens It Will Wipe Away All Citizen Debts.
• “Marginal Utility” of Central Bank Intervention Is Rapidly Diminishing.
  

• China Factory Activity Shrinks for 4th Month: HSBC. China’s manufacturing sector contracted in February for the fourth straight month as new export orders dropped sharply in the face of the euro area debt crisis, the HSBC flash purchasing managers index showed on Wednesday. The new export orders sub-index dropped to 47.4 in February from 50.4 in January as the European debt crisis cast a shadow over Chinese exports.

• Meredith Whitney Lands Book Deal. Ms. Whitney has signed a deal with Portfolio, an imprint of Penguin Group, to write a book about the growing problems in the municipal bond market, according to a statement from the publisher. The book, tentatively titled “Downgraded: Why the Next Economic Crisis Will Be Local,” is expected to hit bookstore shelves in November.
• Greek Crisis Raises New Fears Over Credit-Default Swaps. With Europe’s $172 billion aid package for Greece, it appears that the nation is going to take a step that substantially increases the likelihood that its swaps take effect.

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 25% of the nation’s voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).

• UN Nuke Agency Reports Failed Iran Talks. The U.N. nuclear agency says its experts have again failed to dent Iran’s refusal to cooperate in probing allegations that Tehran covertly worked on an atomic arms program. An International Atomic Energy Agency statement says Iran refused an IAEA request for access to a site where the agency suspects explosives testing related to a nuclear weapon took place. It also says that despite “intensive efforts,” no agreement was reached on how to relaunch the probe, which has been stalled for nearly four years.

• Dell(DELL) Shares Fall On Earnings Miss, Outlook. Dell Inc forecast fiscal first-quarter revenue below Wall Street’s expectations, stoking fears the PC industry has not fully emerged from its downturn and sending the company’s shares more than 4 percent lower. The world’s No. 3 personal computer maker projected sales would be down 7 percent this quarter from the previous quarter, when it posted revenue of $16 billion. That translates into about $14.9 billion, below the average forecast for roughly $15.2 billion.
• Shanghai Court Hears Apple(AAPL) iPad Trademark Case. A Shanghai court began hearing on Wednesday a case brought by a Chinese technology firm seeking to halt the sale of Apple Inc’s iPads across the affluent Chinese city, accusing the U.S. firm of trademark infringement.
• CIA to Software Vendors: A Revolution Is Coming. The U.S. Central Intelligence Agency told software vendors on Tuesday that it plans to revolutionize the way it does business with them as part of a race to keep up with the blazing pace of technology advances.

• Greek Debt Accord Hostage To Political Passions. Eurozone leaders have put off the day of reckoning for a few more months but the latest €130bn rescue package for Greece offers no path out of the crisis and is hostage to explosive political passions.
• Battle Over EU Financial Firewall Threatens To Derail Greek Bailout. A battle over an increased eurozone bail-out fund and International Monetary Fund support for the European Union’s single currency threatens to derail the latest Greek bailout.

• North Korea recently developed a 170-kilometer range rocket launcher, citing an official in the South Korean government. The range is almost double the shooting scope of its existing rocket launcher.

• CBRC has been warning banks against possible credit risks associated with the real estate market as the government continues its strict property curbs. CBRC has ordered banks to control loans to developers in areas with “overheating” property markets. CBRC has asked banks to check each developer’s liquidity, solvency against a list. The Land and Resource Ministry will announce rules to guard against illicit land sales by local governments.
• Non-Local residents are now qualified to buy 2nd homes once they have held residence permits for 3 years, citing the city’s housing regulator.
  

• None of note

• Asian equity indices are -.50% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 160.0 +1.5 basis points.
  
• Asia Pacific Sovereign CDS Index 131.25 -2.25 basis points.
• FTSE-100 futures -.07%.
  
• S&P 500 futures +.10%.
  
• NASDAQ 100 futures +.17%.

• (PWR)/.36
• (DLTR)/1.58
• (TOL)/.03
• (CHS)/.11
• (DCI)/.71
• (LAMR)/.00
• (RRD)/.43
• (ZLC)/.77
• (MGM)/-.20
• (EV)/.43
• (TJX)/.63
• (ADI)/.48
• (FLR)/.82
• (LTD)/1.46
• (ESRX)/.85
• (FLS)/2.29
• (WMB)/.41
• (RGR)/.46
• (JACK)/.25
• (HPQ)/.87
• (SNPS)/.51
• (DDS)/2.02

• Existing Home Sales for January are estimated to rise to 4.66M versus 4.61M in December.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The 5Y T-Note Auction, weekly retail sales reports, weekly MBA Mortgage Applications Report, China Flash Manufacturing PMI, CSFB Paper/Packaging Conference, Barclays Industrial Select Conference, Jefferies Clean Tech Conference, (GCI) Analyst Meeting, (TPX) Investor Day and the (DBD) Investment Community Conference could also impact trading today.
  

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• Germany Eyes Approval for Greek Rescue. Germany wants euro-area finance chiefs to avoid splitting consideration of a 130 billion-euro ($171 billion) Greek rescue and a bond swap to cut the nation’s debt load at a meeting next week, coalition lawmakers were told by German government officials in a briefing. As long as Greece meets conditions for the aid, the finance chiefs will probably approve the package along with the debt exchange, three German officials involved in the telephone briefing yesterday said. A Finance Ministry spokesman declined to comment. Wrangling among euro-area finance ministers on a Feb. 15 conference call over how to reduce Greece’s debt load and tighten control of the aid raised the prospect of a two-step process, according to two people familiar with the talks. In that scenario, the ministers’ Feb. 20 gathering in Brussels would be limited to kicking off the bond exchange and deferring decision on the rest of the bailout funds. As recriminations fly between Greece and its northern European creditors, the clock is ticking toward a March 20 bond redemption when Greece must pay 14.5 billion euros or trigger the first sovereign default in the euro’s 13-year history. “We expect the Greeks to rise to their responsibilities,” German Deputy Finance Minister Steffen Kampeter told a group of lawyers in Hamburg yesterday. “This coming Monday, we will see whether Greece delivers or whether we will be forced to decide on another course of action, one that is not desired.”
• Stress Stops Easing With Greek Debt Faltering: Credit Markets. Measures of stress in global credit markets have stopped easing as a rescue plan for Greece threatens to unravel and some of the largest U.S. and European banks face potential ratings cuts. Interest-rate swap spreads, which gauge fear in debt markets, and benchmark measures of corporate credit risk in the U.S. and Europe touched the highest level in more than two weeks yesterday. Sales of bonds in dollars are poised for the slowest week this year. Relative yields on bank bonds worldwide climbed for a second day after an eight-week decline.
• Euro May Fall to Lowest in Two Years on ‘Bear Trend’: Technical Analysis. The euro may fall toward its lowest level in more than two years against the dollar after dropping below a key support level, Bank of America Corp. said, citing trading patterns. The 17-nation currency’s slide below $1.3026 yesterday confirmed its decline through the 21-day moving average and signals a “larger bear trend,” according to a report by MacNeil Curry, the bank’s New York-based head of foreign- exchange and interest-rates technical strategy. “The subsequent close through the 21-day and break of $1.3026 intra-day pivot points to a resumption of the larger bear trend targeting $1.2644/$1.2510 area support,” Curry wrote in the research note published yesterday.
• Singapore Exports Drop on Europe Fallout. Singapore’s exports fell for the first time in three months in January on lower electronics and petrochemical shipments, as Europe’s debt crisis crimped demand and the Chinese New Year holiday shortened the working month. Non-oil domestic exports slid 2.1 percent from a year earlier, after a 9 percent gain in December, the trade promotion agency said in a statement today. The median of 15 estimates in a Bloomberg News survey was for a 1.6 percent decline. Shipments to Europe plunged 14.5 percent. Singapore’s electronics shipments by companies including contract manufacturer Venture Corp. fell 10.9 percent in January from a year earlier, after declining a revised 4.2 percent the previous month. “The manufacturing sector, and the electronics cluster in particular, have been hit hard by the weakness in final demand from the U.S. and Europe,” said Leif Eskesen, an economist in Singapore at HSBC Holdings Plc. “This is likely to persist. Moreover, slower growth in China and the rest of Asia will also dampen external demand in 2012.”
• Egypt-U.S. Rift Hangs Over IMF Loan Talks as Reserves Plunge. Egypt’s politicians and media are issuing ever-louder accusations of American meddling just as the country seeks loans from the International Monetary Fund, where the U.S. is the biggest shareholder. “America is behind the chaos,” blared a red headline on the front page of state-run Al-Gomhuria newspaper this week. The Muslim Brotherhood said U.S. money was being spent “to destroy Egypt and ruin its society.” The dispute over the prosecution of employees at U.S.-based NGOs, accused of breaking rules on foreign financing, has opened the deepest rift for decades between the military allies. It’s happening as the government prepares to submit an economic program to parliament that will be the basis for its application for a $3.2 billion IMF credit.
• Yelp(YELP) to Raise as Much as $100 Million in IPO. Yelp Inc., the user-generated review website, plans to raise as much as $100 million in what may be the first initial public offering from a major Internet company this year. Yelp, based in San Francisco, said it will offer 7.15 million shares for $12 to $14 each, according to a regulatory filing today. The stock will trade on the New York Stock Exchange under the ticker YELP. The IPO will probably come ahead of Facebook Inc., the biggest social-networking website, which filed to raise $5 billion on Feb. 1, without setting terms. At the midpoint of the price range, Yelp’s offering would value the company at about $778 million, or about 9.3 times last year’s sales. That compares with 5.2 times for Google Inc. and 3.8 times for Yahoo! Inc., which Yelp lists as competitors in its IPO prospectus.
• Al-Qaeda Bid for Role in Syria Cited by Panetta as U.S. Concern. U.S. Defense Secretary Leon Panetta expressed concern that al-Qaeda has voiced support for the opposition in Syria, a sign the group may be seeking a role in the conflict there. “It does raise concerns for us that al-Qaeda is trying to assert a presence there,” Panetta said yesterday in response to a question during a briefing at the Pentagon. “The situation there has become that much more serious as a result of that.”
• U.S Volcker Rule Could Hurt Liquidity, Bipartisan Senators Say. A proposed U.S. ban on proprietary trading may limit liquidity and restrict bank market-making for clients, six Republican and Democratic senators told the Federal Reserve and other regulators. “The proposed rule, as drafted, could adversely affect Main Street businesses by reducing market liquidity and increasing the cost of capital,” the senators said in a letter today. “There is evidence that this is already beginning to occur.” The letter was signed by Democratic Senators Tom Carper of Delaware, Mark Warner of Virginia and Chris Coons of Delaware; and Republicans Pat Toomey of Pennsylvania, Mike Crapo of Idaho and Scott Brown of Massachusetts.
• Most-Hated Stocks Burn Short Sellers as Sears(SHLD), Netflix(NFLX) Lead S&P. The companies investors hated the most in 2011 have returned twice as much as the Standard & Poor’s 500 Index this year, burning speculators who bet stocks from Sears Holdings Corp. to Netflix Inc. would keep falling. The 26 companies in the S&P 500 with the highest so-called short interest relative to shares available for trading rallied 18 percent this year, compared with 8 percent for the full index, data compiled by Bloomberg show.

• Change In Loan-Tallying Method. Goldman Sachs Group Inc. and Morgan Stanley have reduced their use of “mark-to-market” accounting, shielding them from swings in the value of some loans made to companies. After several months of internal discussion, the two companies are making an accounting change affecting a portion of corporate loans that have a combined value of more than $100 billion. The change will value that portion using so-called historical-cost accounting, according to financial filings and people familiar with the matter. Under that accounting method, assets generally are held at their original value or purchase price. Goldman and Morgan Stanley could set aside reserves against possible losses on the loans and hedge them in other ways. The banks are making the change in part because, as a result of regulators’ rules, securities firms using historical-cost accounting won’t have to hold much-larger amounts of capital against the assets if their values go down. There also will be less fluctuation in Goldman and Morgan Stanley’s earnings, because marking the loans to market creates immediate gains or losses for the companies as the values of the loans fluctuate.
• Applied Materials(AMAT) 1Q Profit Falls 77%; 2Q Outlook Sunny. Applied Materials Inc.’s (AMAT) fiscal first-quarter profit slumped 77% on weaker sales and acquisition costs, though the semiconductor-equipment maker said recent orders would deliver a stronger result in the second quarter. Shares jumped 4.8% to $13.84 after hours as results topped expectations and the company projected current-quarter earnings between 20 cents and 28 cents a share, including some acquisition costs, as sales grow 5% to 15% from the prior quarter. Revenue would reach between $2.3 billion and $2.52 billion at that pace. Analysts polled by Thomson Reuters were looking for 15-cent profit and $2.08 billion in revenue.
• Qualcomm(QCOM) President: Continuing With Technology M&As.
• Traders Manipulated Key Rate, Bank Says. A group of traders and brokers successfully managed to manipulate an interest rate that affects loans around the world, one of the banks being investigated has told regulators. In a court filing in Ottawa, Canada’s Competition Bureau said a bank it didn’t identify has told the agency’s investigators that people involved in the alleged scheme “were able to move” interest rates. People familiar with the situation said the “cooperating party” is UBS AG.
• Lehman Brothers Subpoenas Geithner In JPMorgan(JPM) Fight. Lehman Brothers Holdings Inc. (LEHMQ) and its creditors late Thursday said they want to subpoena Treasury Secretary Timothy Geithner to question him under oath over allegations J.P. Morgan Chase & Co., (JPM) illegally siphoned billions of dollars from the collapsing investment bank in the days before it filed for the largest bankruptcy in U.S. history.
• Syrian Conflict Spills to Neighbors. Syria’s civil conflict is rapidly expanding into a regional proxy battle that threatens to cleave neighboring countries, including Lebanon and Iraq, as their populations harden along sectarian lines. Syria’s struggle is reopening sectarian fault lines in places like Tripoli, a city in northern Lebanon where tensions have long simmered. The area’s minority Alawite residents belong to the same Muslim offshoot sect as Syrian President Bashar al-Assad, and have long supported the family regime. Meanwhile, Sunni residents in recent months have provided shelter, hospitals and a base for arms trade to Syrian rebels, all sides acknowledge.
• The War on Wyden. For daring to work on Medicare reform with Republican Paul Ryan, the Democratic senator from Oregon is lambasted by keepers of the liberal flame. Ticked off by Washington’s failure to tackle big problems? Spare a moment for Oregon’s senior senator. Mr. Wyden is the Democrat who in December had the audacity to team up with House Republican Paul Ryan on a proposal to reform and strengthen Medicare—the entitlement that is pushing the country, and seniors, off a cliff. As bipartisan exercises go, this was big, thoughtful, promising.

• Oppenheimer: This Is Why EU Leaders Don’t Want A Greek Credit Event.
• GMO: Here’s A 3-Tiered Way To Short China.
• Chart of the Day: All of the Stock Market Sentiment Indicators Combined Into One Index.
  

• Housing Settlement To Be Taxpayer Funded Confirming Big Banks Are Truly Beyond The Law. The epic farce continues again as the FT reports tonight that the foreclosure settlement over their improper seizure of tax-paying US citizens’ homes will in fact be subsidized by those very same US taxpayers. It is a hidden clause (that has not been made public yet) that allows the banks to count future loan modifications under the $30bn (taxpayer funded) HAMP initiative towards their $35bn agreement to restructure obligations under the new settlement.
• Bank Bonds Not Buying The Rally. (graphs)
• Credit Suisse The Sequel: “Probability Of The Largest Disorderly Default Loss In History On March 20 Has Increased”.

• Rising Gas Prices May Limit Payroll – Tax Cut Savings. Rising gasoline prices could bite into any savings from the expected extension of the payroll tax cut, but for now the higher costs could be somewhat offset by lower winter heating bills.

• Is China Faking Its Economic Growth? Influential short-seller Jim Chanos is still on a China rampage. He thinks the Chinese government is understating its inflation problem — thereby making its economy look stronger than it actually is. “One of the things I’m pretty convinced of based on our analysis, is that inflation is under-reported in China by as much as 4 to 5% a year,” he told CNNMoney’s Poppy Harlow in an interview. If Chanos is right and the Chinese government is under-reporting its inflation data, its measure of economic growth would also be off-kilter. While economists are often skeptical of China’s government figures, Chanos estimates those numbers are way off. “We are seeing rapid falloffs in demand in things like construction equipment, railway construction over there, housing sales — so lots of things are slowing down pretty quickly over there,” he said. “It remains to be seen whether that’s going to go into a full-fledged recession. I do think the property sector which is where we’re focused on, is going to enter — or has entered a recession.”
  

• Athens Faces Tough Bail-Out Terms. The agreement, which officials hope to finalise on Monday, is likely to include an escrow account that must always contain enough cash to pay Greece’s debt for nine to 12 months. If the account falls below that level, money will be taken from funds earmarked to run the Greek government, according to people briefed on the talks. In addition, the bail-out will include a permanent and beefed-up presence of international monitors who will attempt to keep real-time tabs on the Greek government’s spending decisions, officials said.
• Berlin Keeps Unearthly Hush On Eurozone Crisis. Sitting in Berlin in the midst of the eurozone crisis feels like being trapped in the eye of a hurricane. All around Europe the storms of alarm and despondency rage, but in the German capital there is an unearthly hush.

• Just as Greece Complies at Last, Europe Pulls the Plug. Officials from the EU and the International Monetary Fund made two grave errors when they swooped into Greece in mid-2010 and dictated the now hated “Memorandum”.

• China will “unwaveringly” maintain property curbs in both the long and short term, citing Qin Hong, head of the policy research center under the Ministry of Housing and Urban-Rural Development. Local governments will face “relatively large” fiscal pressure this year because of public housing investment and debt repayment, according to Qin.

• Beijing 2011 Land Sales Slump 33% on China Property Curbs. Income from land sales in China’s capital city drops to 105.4b yuan last year from 156.2b yuan a year earlier, citing Centaline Property data. Residential site sales plunged 50% year/year in Beijing to 49.8b yuan. Developers remain cautious on buying land this year. 2012 land sales may be less than 100b yuan.
• China will support some banks in securitizing local government debt that have “good qualities” this year.
  

• Raised (GEOY) to Strong Buy, target $36.
  
• Rated (DGI) to Strong Buy, target $25.

• Asian equity indices are +.50% to +1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 164.0 -5.0 basis points.
  
• Asia Pacific Sovereign CDS Index 141.75 +4.5 basis points.
• FTSE-100 futures +.35%.
  
• S&P 500 futures unch.
  
• NASDAQ 100 futures -.05%.

• (B)/.32
• (CPB)/.62
• (ECA)/.09
• (FRO)/-.58
• (HNZ)/.85
• (HMSY)/.16
• (PPC)/-.31

• The Consumer Price Index for January is estimated to rise +.3% versus unch. in December.
• The CPI Ex Food & Energy for January is estimated to rise +.2% versus a +.1% gain in December.
  

10:00 am EST

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

Upcoming Splits

• None of note
  

Other Potential Market Movers

• None of note
  

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• Large-Cap Value +.08%

• 1) Education +.79% 2) Retail +.77% 3) Telecom +.58%

• ACHN, AIXG, VRTX, IDIX, CPA, RAIL, VVUS, WWWW, PFCB, ROVI, FSLR, AGP, CAB, FIO, BGS, HP and CLD
  

• 1) CSIQ 2) MIPS 3) IMAX 4) SVU 5) MCK
  

• 1) CHK 2) CSX 3) BIDU 4) K 5) AMAT
  

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

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