- 2012 budget skirts big debt decisions. President Obama submitted a $3.7T budget for 2012 that contains spending cuts and increases along with tax cuts and increases intended to trim $1.1T over a decade from projected deficits. But it does not address Social Security nor rising health care costs via Medicare and Medicaid, and proposes only tiny cuts in military spending. Lawmakers worry that the budget accelerates America's "dangerous trajectory" toward a national debt tragedy, and pundits say the president "shouldn't be surprised if the U.S. bond markets, not Republicans, end up determining his political destiny." A map of Obama's budget shows mostly green as an indication of more spending - with little red to indicate less.
- CME mulls NYSE bid. Deutsche Boerse's (DBOEY.PK) interest in buying NYSE Euronext (NYX) is due to both companies' shrinking profits from traditional stock trading, and their interest in bulking up their derivatives trading business. So CME Group (CME) - which knows a thing or two about derivatives because it runs several derivatives exchanges including the CBOT and the CME - is reportedly preparing its own hostile bid for NYSE Euronext. Perhaps it wants to avoid joining Nasdaq OMX (NDAQ) and Chicago Board Options Exchange (CBOE) as an "odd man out" if NYSE inks a deal with the German exchange, on which the two boards will vote this morning. Premarket: NYX +0.3%.
- Singapore Exchange revamps bid for Australia's ASX. While Germany vies for New York, Singapore vies for Australia. To overcome opposition by Canberra lawmakers on national interest grounds, Singapore Exchange (SPXCF.PK) offered more board seats to Australians in its attempted $7.8B takeover of the Australian Securities Exchange, or ASX (ASXFF.PK). The newly proposed ASX/SGX board will include five Australian and five Singaporean citizens in its 13 members, as compared with just four Australians on a board of 15 proposed when Singapore Exchange launched its bid in October.
- China inflation jumps almost 5% as food prices soar. China's consumer price index rose 4.9% in January from a year ago, vs. a 4.6% gain in December and 5.1% in November. January's increase was less than the 5.4% widely feared, but some economists think that could be due to China's reducing the impact of food in the basket of goods it monitors. Regardless, with nonfood items rising 2.6% on top of food rising 10.3%, inflation is spreading. A recent report suggests Beijing is prepared to further increase interest rates and raise the reserve requirement for banks to curb inflationary pressures. Overnight, Japan's Nikkei rose to a 10-month closing high on China's lower-than-expected inflation rate, but other Asian markets declined on concerns China will raise interest rates.
- Euro-zone to double its rescue fund to €500B. Beginning in 2013, a permanent euro rescue mechanism will total €500B ($675B) as part of a package eurozone finance ministers hope will resolve the area's debt woes. The European Stability Mechanism (ESM) is intended to replace the temporary euro rescue fund hurriedly set up in May to avert a collapse of the single currency in the wake of the Greek debt crisis.
- Strong demand for Greek debt. Foreigners stepped up to take 61% of Greece's €390M T-bill auction at an unexpectedly low yield of 3.85%. But yields on longer-term debt spiked this morning after Q4 GDP came in at a lower-than-expected -1.4%.
- U.S. clothing makers warn of rising prices from cotton. China's not the only country worried about inflation; U.S. clothing companies are warning about a spike in prices later this year due to the soaring cost of cotton, and some have already begun raising prices in their spring collections in what's on track to become a 10% general price hike. The price of cotton has risen 150% since the start of 2010, leading observers to declare, "The era of falling clothing prices is ending." Shoppers will also find fewer beads, embellishments, and even color choices.
- TARP's Barofsky calls it quits. Overseer of the government's $700B Troubled Asset Relief Program (TARP) Neil Barofsky said yesterday he will resign at the end of March. By some lawmakers, he was viewed as a much-needed cop monitoring for TARP waste and fraud. By the Treasury, which he aggressively criticized, he was considered a self-promoter who's "been consistently wrong about a lot of big things." Barofsky said he's leaving to spend time with his family, but noted his office has 140 ongoing investigations and said TARP has yet to meet its goal of preserving home ownership.
- Chevron ordered to pay nearly $9B in clean-up costs. A judge in Ecuador ordered Chevron (CVX) to pay $8.6B to clean up oil pollution in the country's rain forest. The plaintiffs, residents of the Amazon rain forest, claim Texaco caused the pollution between 1965 and 1992 and are trying to hold Chevron accountable because it acquired Texaco in 2001. The fine for what's believed to be the largest-ever environmental judgment will double in two weeks if Chevron doesn't publicly apologize. The company said it expected the ruling because of collusion between the government and the plaintiffs, vowed to appeal, and said it will neither pay the fine nor apologize.
- Starbucks exploring partnership with Green Mountain. A source told Reuters yesterday that Starbucks (SBUX) is in partnership negotiations with single-serve coffee segment leader Green Mountain Coffee Roasters (GMCR), turning fears by Green Mountain investors that it would need to compete with Starbucks into joy at the possibility of a partnership with the world's biggest coffee chain. Shares of Green Mountain opened yesterday down 3%, then spiked more than 13% in late afternoon trade on the news to end the day with a 6.7% gain. Starbucks aims to make a splash in the fast-growing single-serve coffee segment that Green Mountain currently dominates with its Keurig one-cup brewers.
- Berkshire dumps BofA for Wells. In Q4 Warren Buffett's Berkshire Hathaway (BRK.A) sold its remaining 5M shares of Bank of America (BAC) and increased its stake in Wells Fargo (WFC) to some 342M shares, worth a fifth of its $52B portfolio. Berkshire bought 8.7M shares of the bank in 2007 when then-CEO Ken Lewis said the U.S. housing slump would end within months. In Jan 2009, Lewis paid $18.5B for Merrill Lynch, a price Buffett called "crazy" in light of the ongoing meltdown around Lehman Brothers. Analysts think Buffett may be "closing out a loser" in preparation to transition Berkshire's portfolio to new management, possibly former hedge fund manager Todd Combs whom Berkshire hired to help Buffett.
- Barclays beats estimates on shrinking writedowns. Barclays PLC (BCS) reported 2010 net income better than analysts expected, thanks to smaller writedowns and a near doubling of investment-banking profit. Net income for the year fell to $5.7B, better than the $5.1B expected by a Bloomberg survey of 13 analysts. Writedowns shrank 30% to $9.1B. The Barclays Capital securities division saw revenue climb 20% in Q4 and will pay out $4.2B in bonuses. Analysts called the results "decent," but new CEO Bob Diamond said current returns "will not be acceptable to our shareholders over the medium term." He vowed to increase the pace and intensity of efforts to improve his bank's financial performance. Premarket: BCS +3.7%.
- Even as profits rise, Danone warns on costs. Groupe Danone (GDNNY.PK) reported higher full-year profit on strong yogurt sales, but joined rivals in warning about a sharp rise in raw material costs to the tune of 6-9% this year. The echo of higher food costs is being widely heard. Last week, food distributor Sysco (SYY) said it experienced 4.5% food cost inflation due to double-digit increases for meat, dairy and seafood.
Earnings: Tuesday Before Open
- CIT Group (CIT): Q4 EPS of $0.37 misses by $0.03. (PR)
- Host Hotels & Resorts, Inc. (HST): Q4 EPS of $0.26 misses by $0.01. Revenue of $1.49B (+12.7% Y/Y) beats by $0.04B. (PR)
Earnings: Monday After Close
- Agilent Technologies (A): FQ1 EPS of $0.60 beats by $0.02. Revenue of $1.5B (+25% Y/Y) in-line. Shares -2.3% AH. (PR, earnings call transcript)
- Limelight Networks (LLNW): Q4 EPS of $0.01 beats by $0.01. Revenue of $55.2M (+64.3% Y/Y) beats by $1.9M. Shares +19.9% AH. (PR)
- Marriott International (MAR): Q4 EPS of $0.39 beats by $0.03. Revenue of $3.6B (+8% Y/Y) in-line. Shares +4.6% AH. (PR)
- Masco (MAS): Q4 EPS of -$0.08 misses by $0.06. Revenue of $1.7B (-8.6% Y/Y) misses by $0.05B. Shares -5.2% AH. (PR)
- Asia: Japan +0.2%. Hong Kong -1%. China flat. India +0.4%.
- Europe at midday: London +0.1%. Paris +0.4%. Frankfurt +0.2%.
- Futures at 7:00: S&P +0.02%. 10-yr -0.15%. Euro +0.36% vs. dollar. Crude +0.32% to $85.08. Gold +0.62% to $1373.60.
Tuesday's Economic Calendar
- 7:45 ICSC Retail Store Sales
8:30 Retail Sales
8:30 Empire State Mfg Survey
8:30 Import/Export Prices
8:55 Redbook Chain Store Sales
9:00 International Capital Flow
10:00 Business Inventories
10:00 NAHB Housing Market Index
10:00 Hearing: Assessing the Implications of the Dodd-Frank Bill
10:00 Hearing: President’s Fiscal Year 2012 Budget Proposal
10:00 Fed's Pianalto: 'Regional and National Economic Conditions'
- Notable earnings before Tuesday's open: CIT, CTL, HCP, HST, MMC, OMC, Q, SIRI, WCRX
- Notable earnings after Tuesday's close: ACAS, ADI, AMMD, CENX, DELL, MDRX, NBR, ROVI, TSLA, VCLK
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.