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  • Lehman watch. After Bear Stearns' (BSC) collapse, some surmise Lehman Brothers (LEH) will be the "next shoe to drop." Deutsche Bank analyst Mike Mayo says fears of a Bear Stearns-like meltdown for Lehman Brothers are overblown, noting Lehman has more liquidity, more support from counterparties, a more diversified franchise and a "seasoned and experienced" CEO. But Bank of Montreal analyst George Lazarevski warns rumors and speculation, even when untrue, become "a self-fulfilling prophecy, and no level of liquidity will be sufficient."
  • Lewis tries to block Bear. In an attempt to negate a potential $1B loss, billionaire investor Joe Lewis will try to stop JPMorgan's (JPM) $236M takeover of Bear Stearns (BSC). Sources say Lewis is 'deeply unhappy' with the $2/share offer. Lewis may be in discussions with rival bidders, and may also consider voting against the offer at an upcoming shareholder meeting.
  • Homebuilder gloom unabated. Just 20% of homebuilders (XHB, ITB) are positive about the industry, unchanged from a month ago. "Interested buyers are out there, but they are either reluctant to go ahead with a home purchase or they are unable to find mortgage financing they can afford," NAHB President Sandy Dunn said.

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  • Government moves to ease mortgage drought. The White House is preparing a move to relax lending constraints on Fannie Mae (FNM), Freddie Mac (FRE), and the FHA. Fed Chairman Ben Bernanke met with Fannie CEO Daniel Mudd yesterday, and has urged it and Freddie to raise more capital to buffer themselves against loan losses, while the government considers reducing their excess-capital requirements. Officials at the Department of Housing and Urban Development have proposed to expand the number of borrowers that qualify for FHA-insured mortgages, which has thus far had limited impact on the credit crunch due to its strict guidelines.
  • Manufacturing nosedives; industrial production drops. New York State's manufacturing index tumbled to record lows (-11.5 to -22.2), confounding economists who expected a rebound. The deterioration is significant, because the New York region had until now suffered less from economic softness than other regions. Meanwhile, industrial production fell a worse-than-expected 0.5% (vs. -0.2% consensus), and the U.S. current account deficit narrowed by 3% to $172.9B in Q4 (4.9% of GDP), largely due to strong exports on the heels of a weaker dollar. Last year, it was as high as 6.6% of GDP.
  • Things go wrong at Rite Aid. Shares of Rite Aid (RAD) fell 6.3% after the drugstore operator warned it would lose more than a previous forecast of $0.27-0.31 during the fiscal year ended March 1. Rite Aid said it cannot estimate its exact loss, but noted that weaker earnings are forcing it to reduce by up to $1B ($1.38/share) a deferred tax credit it no longer thinks it will be able to take advantage of.
  • CSX boosts outlook, sues activist hedge funds. Shares of CSX (CSX) gained more than 5% after the company boosted its Q1 ($0.74-0.77/share vs. $0.63 consensus) and full-year ($3.40-3.60/share vs. $3.05 consensus) earnings guidance, and said it's suing two hedge funds for violating securities laws in their attempts to force changes on the railroad company's corporate structure.
  • NYSE struts its stuff. NYSE Euronext's (NYX) board approved Tuesday the repurchase of up to $1B in shares, a 20% dividend increase to $1.20/year, and a new policy with a dividend target of 35-45% of net income. NYX also said it entered a pact with Abu Dhabi Securities Market to "jointly develop and explore new opportunities in trading systems and other related technology, investor and issuer services and investment products."
  • Times concedes a partial defeat. Harbinger Capital Partners and Firebrand Partners LLC agreed to give up a three-month battle with New York Times (NYT) in exchange for two seats on an enlarged 15-member board. The 19% stakeholders are expected to push for aggressive reforms at the 157-year-old paper, including selling the Boston Globe.
  • MF Global fears trigger selloff of brokerages, clearing firms. Shares of MF Global (MF) plunged 65.1% after speculation over solvency concerns that saw customers threatening to pull funds. MF, the largest futures brokerages, insists it is "very well capitalized" and has "sufficient funding to conduct our business in normal course." Brokerages, exchanges, and clearing firms were hit by the news: Interactive Brokers (IBKR) -14.6%; GFI Group (GFIG) -21.7%; FCStone (FCSX) -40.5%; Penson (OTC:PNSN) -22.3%; CME Group (CME) -7.6%; IntercontinentalExchange (ICE) -9.5%.
  • Octa-core and more. Intel (INTC) revealed plans for new chips with four, six, eight, and perhaps even 12 microprocessor cores. (Intel's current 'quad-core' chips are really two dual-core chips.) A new Xeon server chip (Dunnington), due in H2 2008, will boast six chips. A more radical Nehalem chip, slated for Q4 production, will be used for PCs, notebooks and servers, offers 2-8 processors, and a special controller that will speed memory access. Larrabee, a graphics chip, may hit 12 cores and is likely to compete with offerings from Nvidia (NVDA).
  • Morgan Stanley launches India, China currency ETNs. Morgan Stanley (MS) listed its first ETNs Monday, the Market Vectors-Chinese Renminbi/USD ETN (CNY) and Market Vectors-Indian Rupee/USD ETN (INR). The ETNs, similar to ETFs, give investors exposure to the movement of the U.S. dollar vs. Chinese and Indian currencies.
  • Court backs Novell suit against Microsoft. The Supreme Court refuted Microsoft's (MSFT) appeal to halt a Novell (NOVL) antitrust suit that alleges Microsoft deliberately targeted and destroyed" Novell's WordPerfect and QuattroPro programs, which ran on other operating systems, in order to secure a Windows monopoly. Microsoft had argued Novell did not compete in the OS market, and has no claim to harm by alleged anticompetitive conduct in that arena.
  • Moody's Places Amgen Debt on Review
  • Illinois Tool Needs Retooling
  • Pressure on Fed to slash interest rates
  • Pilots’ Talks Apparently Fail in a Northwest-Delta Hookup

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Source: Wall Street Breakfast: Must-Know News