List of Bad News Today and Tomorrow (?): A Dirty Laundry List

Sudden Escalation of Tension (vs China, vs Iran, vs Venezuela)?? US raises stakes on Iran by sending in ships and missiles. Also by Bloomberg: China, Iran Prompt U.S. Air-Sea Battle Plan in Strategy Review (??)

Asian stocks and currencies fell as manufacturing surveys added to speculation that Chinese policy makers will rein in record lending growth. (?)

Bond risk climbed on concern Greece will need a bailout to repay its debts. Sovereign debt-crisis which may include Ireland, UK into it. (?)

Citigroup: Selling Citi Private Equity Unit

Citigroup Inc. plans to sell or split off its $10 billion Citi Private Equity unit, expanding the list of money-management businesses the U.S. bank is disposing of to reduce debt, people familiar with the matter said.

Citi Private Equity, which takes minority stakes in companies and invests in other buyout funds, oversees about $2 billion of Citigroup’s money. The rest is from outside investors. Managers of the decade-old unit, led by Todd Benson and Darren Friedman, have discussed buying it for themselves alongside new partners or with other financing, one person said.

Benson and Friedman stepped in as co-heads of Citi Private Equity after the January 2009 departure of John Barber, who had led the unit for nine years. Neither of the co-heads returned calls for comment, and Citigroup spokeswoman Shannon Bell declined to comment.

Other money-management units marked for sale or closure include the Citi Property Investors real-estate unit, which oversees $12.5 billion; and the Hedge Fund Management Group, which allocates money to hedge funds on behalf of its own investors, the people said. More on Citigroup Private Equity

Q4 2009 Earnings: An Anal Look-in; Impressive Results, Depressingly Dismissed?

With nearly half of the S&P 500 reporting, Q4 earnings are on track to surge 206%vs 2008. Sounds impressive. But that's largely due to a big recovery from the economic and credit market meltdown at the end of 2008.

Banks swung to profits after suffering massive losses at the peak of the crisis. Excluding financials, the S&P 500 should report more-modest but still solid 15% growth, according to Thomson Reuters.

Results are in from 220 of the S&P 500 firms. A very high 78% have topped Q4 EPS views. Two-thirds have beaten sales targets.

S&P 500 revenue likely rose just 7% in Q4, or 2% excluding financials.

But after several quarters of layoffs and other cost cuts, even a modest demand pickup can fuel big bottom-line gains.

Earnings likely more than doubled for the consumer discretionary sector, including battered auto-related firms. Materials companies' profits will nearly triple.

Meantime, health care and industrials are on track for single-digit profit drops. Medical firms saw relatively steady profits in the recession compared to other sectors.

Techs are on track for 53% profit growth. Most of the big caps have reported, including Apple, Google, IBM, Intel, and Microsoft. All but one S&P 500 tech firm have topped Wall Street views -- by 25% on average. Analysts have been been raising their growth forecasts for 2010. They now see a 38.6% overall earnings jump in Q1, 48% for techs.

That hasn't satisfied investors. Since Jan. 11, when Alcoa kicked off earnings, the Nasdaq has fallen 7.1% and the S&P 500 6.4%.

Weekly ActionForex (Jan 25-29): More Upside for US in Feb Undenied?

January turned out to be a month dominated by risk aversion as we've seen broad based selloff in yen crosses.

• Euro was hardest hit on concern in Greece's fiscal heath, with EUR/JPY down -6.45%.
• New Zealand dollar was secondly worst performer after disappointment inflation data and was down -6.39% in January.
• Even the relatively resistance AUD/JPY, which was supported by strong data from Australia, was down -4.61%.

A couple of factors, including sovereign rating concerns in some countries in Eurozone, more tightening measures from China and US Obama's bank plans would continue to weigh on market sentiments going forward.

We'd like to point out the bearish January reversal in US stocks. DOW edged higher to 10729 earlier in the month but then dropped sharply to close at 10067, which is way below December's low of 10235. That is a very clear sign of topping and we'd probably start to see more position unwinding in the rest of Q1.

Dollar's reaction to US data will be tricky and we should look through the initial reactions but focus on intermarket relations to determine the underlying force. Just like Friday's Q4 GDP which showed a strong rise of 5.7% annualized. The ultimate reaction was that DOW was down -0.52% on Friday which in turn lifted dollar and yen.

The January FOMC statement showed slightly more hawkish tone on economic growth though the overall stance remained unchanged – the Fed funds rate will be kept at 0-0.25% and 'economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period'. Kansas City Fed President Thomas Hoenig's dissent to keep the 'extended period' phrase was also surprising and signaled there might more hawks appearing later this year.

Euro continued to be weighed down by concern on Greece and possible contagion effects. In particular, Germany and France denied a report of an imminent EU bailout of Greece and sent Greece CDS up to 414 record 414 level which was the same as Dubai's CDS when it got a $10b bailout in December. The yield on 10-year Greek bonds rose to as high as 7.15 percent , the highest level since October 1999 and up from 4.99 percent on Nov. 30. Euro will likely remain pressured against dollar and yen on this issue. Nevertheless, the decline against Swissy and Sterling look a bit stretched. Indeed, Friday's sharp rebound in EUR/CHF argues that SNB might start to intervene again after EUR/CHF approaches 1.45 level.

Sterling, on the other hand, was somewhat supported by Hawkish comments from BoE Sentance. It's likely that BoE will pause the quantitative easing program this week. However, the path ahead is still very unclear considering that recovery in UK is still very weak. We're talking about a mere 0.1% qoq expansion in Q4 in UK's GDP which suggests that there are still much risk of returning into recession. It should be just a matter of time when Sterling catches up with weakness of other European currencies.

Looking at the charts, as mentioned before DOW's single month reversal in January is definitely a sign of topping after it fails to sustain above 55 months EMA. It's still a bit early to conclude whether whole medium term rise from 6496 has completed, but near term weakens in anticipated in any case and further fall should be seen towards 38.2% RETRACEMENT OF 6569.96 TO 10729.89 AT 9102.6.

Another point to note is that CRB commodity index might have topped in 293.75 on bearish divergence condition in daily MACD, after failing 100% projection level of 297. The sharp break of the trend line support should have already set the stage for deeper fall to 213.2 support level going forward.

The above developments is inline with the bullish view on dollar.

US Market Round-Up (Jan 25-29): Top Stories

Stocks had their worst month since February 2009. U.S. stocks fell this week as worries about technology company earnings and outlooks coupled with uncertainty about the political situation and concerns about sovereign debt stability weighed on sentiment and valuations.

State-of-The-Union Address. Speaking to the nation and members of Congress in a high-stakes policy address, President Barack Obama used his first State of the Union speech to call for a host of job-creation measures and a redoubled effort to finish health-care reform in the midst of a newly challenging political environment for him and his party. Striking a populist tone at times but reaching out to his Republican opponents at others, Obama defended his accomplishments from his first year in office and looked ahead for progress on climate change, education and the war on terrorists. Read more about the State of the Union address .

Another term for Bernanke Federal Reserve Chairman Ben Bernanke survived hard-core opposition to his handling of the financial crisis by some Senate Republicans and Democrats and won approval on Thursday for a second four-year term. Bernanke received more "no" votes than any Fed chairman in history, but in the end was confirmed by a vote of 70-30. Read more about Bernanke's tenure .

Few clues on the Fed The Federal Reserve will tighten U.S. monetary policy in June. No, it will be September. Wait, it won't be until after the November election. Check that, not until 2011. How about 2012? In plain English, Fed watchers are all over the place. The central bank repeated its pledge that rates will stay at ultra-low levels for an "extended" period of time, but just how long is that? Read more about what economists are saying about when the Fed will tighten .

Defending AIG's bailout Facing sharp criticism on Capitol Hill, Treasury Secretary Timothy Geithner and his predecessor, Henry Paulson, defended their decision to complete a $182 billion bailout of American International Group Inc.(AIG), arguing that it was necessary to protect the financial system from implosion. Paulson said an AIG failure would have been devastating to the financial system, while Geithner said taxpayers could recover the cost of the bailout if lawmakers support a proposal to impose a $90 billion fee over 10 years on financial institutions. Read more about their testimony .

The iPad makes its debutApple Inc. (AAPL) ended months of speculation by unwrapping the iPad, a new touch-screen tablet computer that Chief Executive Steve Jobs said would revolutionize how people access their digital content and change the future of personal computing. Jobs said the iPad is designed to fill a gap between the iPod touch and iPhone and its MacBook line of laptop computers. Read more about the highly anticipated device .

World Economic Forum, Davos A focus on rising deficits in the U.S. and some other developed countries could prove misplaced as policymakers attempt to avoid a double dip, according to some economists attending the annual gathering of business leaders and politicians in the Swiss mountains. The potential for fiscal crises has been identified as a top fear by participants in this year's annual meeting of the World Economic Forum. Read more about what's going on in Davos .

Toyota's big recall Japanese automaker Toyota Motor Corp. (TM) expanded its recall late in the week to another 1 million vehicles and said it would be recalling vehicles in Europe to correct problems leading to unexpected acceleration. The latest recall, to fix problems with floor mats that block accelerator pedals, came on top of an earlier move to recall models with problems in the accelerator mechanism itself. Read more about Toyota's recall .

Highest foreclosure rates The Las Vegas metropolitan area suffered a foreclosure rate that was five times the national average and the highest rate in the country in 2009, according to a report by RealtyTrac, an online foreclosure marketplace. The 20 cities with the highest rates of foreclosure notices were all in California, Florida, Nevada and Arizona -- states with markets that got extremely hot during the real-estate boom, according to RealtyTrac's year-end report. But the trouble isn't over yet. Read more about the foreclosure data .

Wall Street Diary (Jan 29): Another Week of Let Down Despite Another Week of Good Show of Q4 GDP & Earnings

DJ30 -53.13 NASDAQ -31.65 NQ100 -1.7% SP500 -10.66

A better-than-expected GDP report couldn't keep stocks from selling off and logging their third straight weekly loss, which has left the stock market down nearly 4% since the start of the new year.

This came on the heels of Ben Bernanke's reconfirmation to Fed Chairman.

Earlier on, the final consumer sentiment survey for January from University of Michigan came in at 74.4, which is better than the 73.0 reading that many had forecast. This report hasn't helped stocks extend their morning advance either.

Pre-market participants already had the time to chew on another big batch of earnings announcements. Overall results remain pleasing as Amazon.com (AMZN) brought in better-than-expected bottom line results and issued upside guidance, while Microsoft (MSFT) also exceeded earnings expectations. Honeywell (HON) offered an upside earnings surprise, as well. By second session in the afternoon, market gave this a middle-finger!

Stocks started the session in positive territory (very positive territory it was indeed) and even made their way to a gain of more than 1%. The move was underpinned by an advance fourth quarter GDP reading that showed (i) Annualized quarter-over-quarter growth of 5.7%, which was considerably stronger than the 4.7% rate of expansion that had been widely forecast, (ii)
Core personal consumption expenditures (PCE) increased at an annualized quarter-over-quarter rate of 1.4%, which is slightly stronger than the 1.3% increase that had been expected.

Though Fed member Kohn indicated in a speech that interest rates are likely to stay near zero for an extended period if the economy follows the trajectory expected by the Fed, signs of strong economic growth brought back speculation that interest rates will be hiked sooner than later (may be this is the next It-thing -thus why market misbehaved over pretty statistics and numbers coming out today).

That notion drove the dollar 0.7% higher against competing currencies and put the Dollar Index at a fresh five-month high. The notion of a stronger economy also looked like it would reheat the reflation trade as Commodities and Natural Resource stocks climbed sharply. The energy sector climbed to a 1.7% gain, while the materials sector made its way to a 2.1% gain. However, both commodities and natural resource stocks then tanked, which culminated in a 1.4% loss for both energy stocks and materials stocks!

The two sectors had been the best performers in the early going, but ended the session among the worst performers! (Total Surprise-Totally contrary to the abovementioned expectation)

Tech dropped 2.1% to finish the session with the steepest loss. Given that tech carries more market weight than any other sector, its weakness in recent sessions has caused a considerable drag on the broader market. During the course of the past 10 sessions tech stocks have dropped more than 9%, leaving the S&P 500 to lose 6.5% over the same period.

Precious metals moved lower this session. Both gold and silver futures were volatile following the release of the Q4 GDP report: February gold closed 1.2% lower at $1089.70 and March silver closed 3.3% lower at $16.93.

Crude oil futures spiked higher in reaction to the Q4 GDP report, then crude oil futures trended lower for the rest of the session. March crude oil closed 1.0% lower at $72.88 per barrel. Natural gas futures traded with gains early in the session, but sold off as crude oil moved lower and the dollar moved higher. March natural gas closed relatively unchanged at $5.13 per MMBtu.

In a sign of conviction, trading volume on the NYSE surpassed 1.5 billion shares. That was the most action in one month. (This was really rubbing on the pain: some very powerful but stealth overlords behind the US equities market sold with abandon -in great volume and in great sell-off as all early gains were wiped out and still knocked away previous closing share prices).

Despite news that unemployment in the 16 countries that use the euro hit 10% in December for the first time since 1999, Europe's major bourses have extended their gains in the wake of upbeat GDP data from the U.S. (So, world-wide general consensus on interpreting the GDP results was unmistakably identical: good numbers=good news=good reason for market to move up).

In Asia, the final session of the week saw the MSCI Asia Pacific Index lose 1.7% and Japan's Nikkei drop 2.1%. Sellers kept the pressure on Toyota Motor (TM), too -- the stock has tumbled more than 10% this week. Honda Motor (HMC) was weakened by a stronger yen.

In Hong Kong, the Hang Seng fell 1.2% as investors banks fell under renewed pressure amid ongoing concern regarding Beijing's moves to curb lending. That left China Construction Bank and Industrial Commercial Bank of China to slide. 2.1% lower.

US GDP Q4 2009: A Case Study

U.S. GDP rose 5.7% in the fourth quarter which was the fastest pace of growth in six years, surpassing estimates of 4.7%. The second consecutive quarter of growth signals that the economy has distanced itself from the worst recession since WWII (Good Job Obama!!).

BUT FOR ALL 2009, the year saw a shrinkage of 2.4% for the US economy -worst single-performance since 1946

A 39.3% increase in gross private investment was the primary driver of growth, as companies increased their spending on equipment and software.

However, a -15.4% decline in structures -which is the sixth straight negative reading- is evidence that companies remain reluctant to make longer-term investments.

Consumers also showed signs of retrenching as the pace of personal consumption slowed to 2.0% from 2.8%, but did exceed expectations of a pullback to 1.8%. A drop in durable goods orders from 20.4% to -0.9% underlines the hesitation in making commitments to big-ticket items and long lasting goods which are typically funded through borrowing.

Banks remain reluctant to make loans and consumers and businesses shell shocked from the credit crisis may continue their risk adverse behavior. The robust growth despite a 0.2% drop in government spending may be the most significant happening, as concerns are that as stimulus efforts wane growth will stall, increasing the likelihood of a double dip recession.

Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades.

Consumer spending, which comprises about 70 percent of the economy, rose at a 2 percent pace, more than anticipated following a 2.8 percent increase in the previous three months. Economists projected a 1.8 percent gain, according to the survey median.

Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August.

Household purchases dropped 0.6 percent last year, the biggest decrease since 1974.

Increases in production last quarter stemmed the slide in inventories. Stockpiles dropped at a $33.5 billion annual pace following a $139.2 billion decline the previous three months. Inventories declined at a record $160.2 billion pace in the second quarter.

Today’s report showed purchases of equipment and software increased at a 13 percent pace in the fourth quarter, the most since 2006. The gain helped offset a 15 percent drop in commercial construction, leaving total business investment up 2.9 percent over the past three months.

Today’s GDP report is the first for the quarter and will be revised in February and March as more information becomes available