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  • Weak employment, inflation, hmm... ADP says the private sector lost 23,000 jobs in February, the first monthly drop in 4.5 years. The ISM's survey of service sector jobs beat estimates, but at 49.3%, remains below 50%, signifying contraction. Meanwhile the Fed's Beige Book sees all districts reporting decelerating growth, with inflation on the rise across the board, further raising the scepter of "stagflation" - stagnant growth coupled with inflation. Factory orders fell 2.5%. "It looks pretty weak across the board. It says that the Fed needs to and can continue to cut rates," economist Robert Brusca said.
  • Munis come roaring back. Yields on municipal bonds are down about 15 BP since last Friday, while Treasurys are about 15 BP higher, as historic yields entice large funds and retail investors. Wilbur Ross bought $1B in bonds, calling it "an extremely attractive segment of the market, even after the recent rally." Bill Gross's Pimco bought $1.5B of munis Friday.
  • No break in credit squeeze. Global short-term lending markets continue to struggle, despite massive injections from governments in the U.S. and Europe. Euro-zone banks are lending each other at 4.4%, 40 BP higher than the ECB's 4% target, while three-month Libor stands at 3%, well above where investors believe the Fed's target rate will sit three months hence. Another sign of strain: the cost of insuring corporate debt (a.k.a. credit default swaps) continues to surge to record levels, suggesting "perceived systemic risk to the financial system," BofA analyst Hans Mikkelsen says.
  • SWFs: Harmless hulks. Sovereign wealth funds [SWFs], which have injected $24B into U.S. financial firms over the past few months, are not a security risk officials testifying before a House committee say. "Protectionist sentiment stems partly from a lack of information and understanding of SWFs, which in turn is partly due to a lack of transparency and clear communication on the part of the funds themselves," Treasury Undersecretary for International Affairs David McCormick said. "SWFs have been a beneficial source of capital for U.S. financial institutions," Fed General Counsel Scott Alvarez says. You don't say.
  • Greenspan: Credit markets won't snap back until housing bottoms. Massive inventories must decrease and housing prices must stabilize before global credit markets can recover from the present liquidity crisis, former Fed Chairman Alan Greenspan says. "The level of housing has got to fall. If it doesn't fall further we are going to be involved with a continual backing up of inventory pressing on prices."
  • Bush, OPEC blame each other for expensive oil. President Bush slammed OPEC for refusing to boost production despite $100+/barrel oil. "It should be obvious to all that demand is outstripping supply and it's making prices go up," Bush said. OPEC president Chakib Khelil countered by blaming skyrocketing oil prices on a weak U.S. dollar. "What is happening in the oil market is due to the mismanagement of the U.S. economy," he said. U.S. crude stocks unexpectedly fell last week by 3.1M barrels to nearly 6% below last year's level.
  • Fire sale at UBS? Shares of UBS (NYSE:UBS) fell 3.3% in Zurich on speculation it sold $24-26B of Alt-A mortgages to Pimco for $0.70 on the dollar. Analysts at JPMorgan now expect UBS to writedown $17.92B in Q1; other firms forecast anywhere from $15B to $25B.
  • Yahoo buys time. Yahoo (NASDAQ:YHOO) postponed a March 14 deadline for candidate nominations to its board, a move that gives it more wiggle room in its efforts to elude a takeover bid by Microsoft (NASDAQ:MSFT). Microsoft has signaled it would attempt to oust Yahoo's board if Yahoo didn't initiate negotiations before March 14. A new date has not yet been set. "Our objective here is to enable our board to continue to explore all of its strategic alternatives for maximizing value for stockholders without the distraction of a proxy contest," Yahoo CEO Jerry Yang told employees in an email.
  • Citi shuts branches. Citigroup (NYSE:C) began shuttering branches in weak-performing locations. As part of its strategy to dump underperforming businesses, Citi also hired Goldman (NYSE:GS) investment bankers to advise it on a potential sale of its CitiStreet JV with State Street (NYSE:STT); CitiStreet administrates retirement plans. CEO Vikram Pandit said Citi remains "financially sound," and hope the divestitures would further contribute to the bank's (shaky) capital base.
  • Exxon 2008 capex: A cool $25B. ExxonMobil (NYSE:XOM) will increase its capital spending by 25%/year for the next few years, to $25-30B/year, in order to find and develop new energy resources. In recent years, Exxon and other Western oil giants are struggling to increase their production and replace reserves. Still, Exxon said it is "well positioned" to grow its volume over the next 5-10 years or more. CEO Rex Tillerson called $104/barrel oil "pretty crazy."
  • Ambac bailout - huh? Investors sold off Ambac (ABK) after it announced plans to sell $1.5B in common stock ($1B) and notes ($500M), instead of the big-bank-led bailout hyped on CNBC recently. Ambac said the anticipated $1.5B may not be enough to secure its critical AAA insurance rating. Shares plunged 18.8% and lost another 3.45% in extended trading.
  • Luxury sellers sag. Upscale retailers reported weakening sales, particularly among lower-end customers. Saks (NYSE:SKS) earned $0.19/share after items, short of $0.20 consensus estimates, on sales of $1B. Neiman Marcus said same-store sales fell in February. "Our sense is that the aspirational customer has pulled back somewhat in response to concerns about the U.S. economy and stock and housing markets," CEO Burton Tanksy said.
  • For better or for worse. Bank of America (NYSE:BAC) still wants to acquire troubled mortgage lender Countrywide Financial (CFC) despite ballooning delinquency rates in its loan portfolio. Last week Countrywide said 90-day overdues jumped to 5.4% from 0.6% a year earlier. BofA is slated to complete a $4B buyout in Q3.
  • Another subprime scarper. Merrill Lynch (MER) will stop subprime mortgage lending at its First Franklin Financial unit, and plans to eliminate 650 jobs.
  • TiVo records smaller loss. TiVo (NASDAQ:TIVO) reduced its Q4 loss to $0.06/share from a $0.20 loss a year ago, better than the $0.11 loss analysts expected. Subscriptions added were weak at 109,00 vs. 163,000 last year. Monthly churn was 1.5% vs. 1.2% last year and 1.3% last quarter.
  • Icahn still wants more Motorola. Activist investor Carl Icahn now owns 6.3% of Motorola (MOT), up from 5%. Icahn's stake has grown steadily since September, when he held 3.3%. Icahn wants Motorola to restructure its mobile handset unit, which MOT has put on the selling block.
  • PC shipments flourish. Q4 PC shipments were up sharply. Apple (NASDAQ:AAPL) led the way with 39.9% Y/Y growth to 2.2M units, followed by Hewlett-Packard (NYSE:HPQ) [+25.5% to 14,6M] and Dell (NASDAQ:DELL) [+17.4% to 11.3M].
  • BHP expects long campaign for Rio
  • Thornburg: Failure to meet margin call triggers defaults
  • GM will assist Delphi exit plan
  • Online job recruitment up in Feb., off vs year ago: Monster
  • Gates no longer world's richest man

Today's Markets

  • In Asia Thursday, markets closed higher. Nikkei +1.88%. Hang Seng +0.99%. Shanghai +1.59%.
  • Europe markets are inching down at midday. FTSE -0.28%. CAC -0.31%. DAX -0.27%.
  • U.S. futures are down at 6:45 AM. Dow -0.29%. S&P -0.32%. Nasdaq -0.16%.

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Source: Wall Street Breakfast: Must-Know News