“Change is the law of life. And those who look only to the past or present are certain to miss the future” — John F. Kennedy.

1. FCC rolls out net neutrality rules — the FCC voted 3-to-2 in favor of launching net neutrality rules, which would go into effect early next year.
2. Bullishness Hits a Fresh High — Investor’s Intelligence survey on Dec 22 showed a fresh high bullish reading of 58.8%. This is the highest reading since the second week of October 2007 – just one week shy of the all-time market high of 1565 on the S&P 500.

3. Ireland to inject $4.9 billion into AIB — The Irish government on Thursday effectively nationalized Allied Irish Banks PLC after the nation’s High Court approved the finance ministry’s request to allow it to inject an additional 3.7 billion euros ($4.9 billion) of capital into the troubled lender.
4. China auto shares sputter as car policy unveiled — investors reacted to the Beijing municipal government’s new, aggressive measures to address traffic congestion by curbing growth in car ownership.
Officials are planning to issue about 240,000 new vehicle licenses next year, compared to 700,000 registered so far this year, Zhou Zhengyu, deputy secretary-general of the Beijing municipal government, told reporters Thursday.

The week ahead — Economic data from Econoday.com:

“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” – Benjamin Graham

1. Part of Obamacare ruled unconstitutional — A federal judge ruled yesterday that a key part of President Obama’s healthcare overhaul is unconstitutional, marking a significant but not necessarily fatal setback to the major legislative accomplishment. The ruling took issue with the law’s requirement that most Americans buy insurance or pay a penalty, but didn’t go so far as to say states or the federal government should stop implementing the law.
2. VIX hits low — the VIX is fast approaching levels that are consistent with very high complacency.

3. Moody’s may downgrade Spain — Moody’s warned it may downgrade Spain’s Aa1 credit rating. The country’s high refinancing needs in 2011 and the possibility of a further rise in Spain’s public debt ratio were contributing factors to the warning.
4. No surprises from FOMC — There were no surprises in yesterday’s FOMC announcement, as the committee maintained its near-zero rates, expects no rate changes for an ‘extended period,’ and stuck to its bond-buying plan. Kansas. The committee noted that the economic recovery is continuing, but not fast enough to cut unemployment. Household and business spending is rising moderately. Employers remain reluctant to hire, housing is still depressed, and underlying inflation measures are still trending down.
5. Senate approves tax deal — the Senate voted 81-19 to approve the $858B tax deal hammered out by President Obama and Republican leadership. The bill now goes to the House, where it’s expected to face stronger opposition. Lawmakers are rushing to reach a resolution before the Bush-era tax cuts expire on Dec. 31.
6. S&P boosts China’s rating — S&P raised China’s long-term sovereign credit rating to AA- from A+ this morning. S&P cited the country’s strong foreign reserves and fiscal position, adding “we believe the Chinese authorities would respond to future threats to financial stability with timely measures, based on our observations over the past two years.”
7. Moody’s cuts Irish credit rating by five notches — Moody’s Investors Service said Friday it has cut its rating on Irish government bonds by five notches to Baa1 from Aa2. The credit rating agency said the outlook for the rating is negative.

The week ahead — Economic data from Econoday.com:

“Financial markets will find & exploit hidden flaws, particularly in untested new innovation — and do so at a time that will inflict the most damage to the most people” — Raymond F. DeVoe

1. White House outlines tax accord — President Obama announced yesterday evening a ‘framework’ agreement with Republicans that includes a two-year extension on Bush-era tax cuts, keeps the dividend and capital gains tax at 15%, temporarily cuts payroll and Social Security taxes, and extends unemployment benefits. However, despite earlier reports that the deal was ‘all but done,’ Democratic lawmakers object to parts of the plan and will discuss the matter today. The downside here is lost revenue to the government, which would total at least $450B in 2011 and could climb to $600B, depending on the strength of the economy over the next two years.
2. China may hike rates this weekend — The Chinese central bank may increase its interest rates this weekend to signal its shift to a “prudent” monetary policy amid rising inflationary pressures, a published Chinese media report said Tuesday. Chinese inflation figure is scheduled for release this Saturday.
3. US Delivers More Subpoenas in Insider Trading Probe — Federal authorities have expanded an investigation into insider trading on Wall Street, bringing to more than one dozen the number of subpoenas sent to hedge funds and other investment firms over the past two weeks, people familiar with the inquiry said.
4. China exports, imports surge in November — China’s exports jumped 34.9% in November from the year-ago period, accelerating from October’s 22.9% growth and surpassing the 22.4% increase expected by economists surveyed by Dow Jones Newswires. Imports grew at an even faster pace, 37.7%, ahead of October’s 25.3% increase and expectations for a 24.5% expansion.
China ups reserve requirements to cool inflation; The People’s Bank of China Friday raised lenders’ reserve requirement by half a percentage point in a move designed to take liquidity out of the banking system and cool inflationary pressures in the country. The hike is the sixth such increase in bank reserve requirements by the central bank this year. It takes effect on Dec. 20.
5. EU banks reportedly face further stress tests — The European Union will begin a fresh round of stress tests on its major banks in February, including an increased focus on the immediate access that lenders have to liquid assets, according to media reports. Olli Rehn, European commissioner for economic and monetary affairs, said late Tuesday that the next round of tests will be more rigorous and will include a liquidity assessment, rather than solely focusing on banks’ capital levels, according to the reports.
6. U.S. trade deficit narrows to $38.7 billion – — The U.S. trade deficit narrowed sharply in October, surprising economists and suggesting that the trade sector may make a positive contribution to growth in the fourth quarter for the first time since the final three months of 2009.

The week ahead — Economic data from Econoday.com:

“There are two kinds of people who lose money: those who know nothing and those who know everything” — Henry Kaufman

1. Europe OKs $112.53 billion Ireland bailout — European financial leaders on Sunday approved an 85-billion-euro, or $112.53 billion, aid package for debt-crisis-stricken Ireland.
2. Euro Crisis Spreads To Spain, Portugal, Italy As Yields Swell — The euro zone’s debt crisis worsened Tuesday, as yield spreads for Portugal, Spain, Italy and even Belgium widened amid mounting fears of defaults or even a breakup of the single-currency area. The euro hit a 10-week low, falling 1.43 cents to $1.2978. It tumbled nearly 10 cents in November. Shares of European banks, the biggest holders of euro zone debt, continued to sell off.
3. ECB extends liquidity, bond buys ‘ongoing’ — The European Central Bank will continue to provide as much short-term liquidity as euro-zone banks demand through at least the first quarter of next year, but ECB President Jean-Claude Trichet offered no hint Thursday on the size of additional purchases of troubled European sovereign bonds.
4. China Announces Shift to ‘Prudent’ Monetary Policy — China will switch to a prudent monetary policy from a moderately loose stance, the Communist Party’s top leaders decided on Friday, a change that could pave the way for more interest rate increases and lending controls, the state Xinhua news agency reported on Friday.
5. White House Offers $150 Billion Deal To Extend Tax Cuts — The White House has signaled its price for yielding to GOP demands to extend upper-income tax cuts: $150 billion to pay for a year of emergency jobless benefits and a batch of expiring tax credits.
6. Bullish Sentiment Rises, Still Below 50% — The latest poll from the American Association of Individual Investors (AAII) was released this morning and showed that bullish sentiment increased modestly to 49.66% from 47.4% last week. While a bullish sentiment level of 49.66% is on the high side, it’s still well off the multi-year high we saw in early November when the S&P 500 was trading at bull market highs.

The week ahead — Economic data from Econoday.com: