“To me, the “tape” is the final arbiter of any investment decision. I have a cardinal rule: NEVER FIGHT THE TAPE!!!” — Martin Zweig

1. Libyan unrest roils markets — a major oil producer, Libya has closed all its ports, and as many as 550K barrels per day of production, or a third of Libya’s normal production, may now be shut in. In the meantime, a growing number of oil companies have suspended their operations there, and Eni (E) shut down a pipeline that brings natural gas from Libya across the Mediterranean Sea to Italy.
2. Bullish Sentiment Declined based on the latest Sentiment Survey from AAII —

3. Consumer sentiment rises to a three-year high in February, according to a University of Michigan poll — the gauge rose to 77.5 in February from 74.2 in January. A prior estimate for sentiment in February was for 75.1.
4. Fourth-quarter GDP growth revised down to 2.8% — the U.S. economy grew at 2.8% pace in the final three months of 2010 — slower than the government initially projected — based on new data showing that consumers and state and local governments spent less than first estimated. Last month, the Commerce Department said gross domestic product climbed at a 3.2% annual rate in the fourth quarter.

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 (Economist)

1. Japan’s GDP shrinks less than expected — Japan’s GDP fell an annualized 1.1% in Q4, as exports slowed and government stimulus programs faded. The contraction was less severe than the 2% drop economists had expected, and the pullback may prove to be temporary as foreign demand lifts Japan’s domestic production.
2. 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.
3.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.
4. 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.
5. Moody’s places Australia’s big four banks on review — Moody’s Investors Service placed Australia’s four largest banks under review for possible downgrades and reiterated a negative outlook for them Wednesday, warning the proportion of wholesale funding that the banks raise in offshore markets remains high in relation to their size.
6. China hikes reserve requirements — China raised its reserve requirements by 0.5% to 19.5%, the second hike this year. China raised its key interest rate by 0.25% last week, and is trying to tamp down inflation that appears to be accelerating.

The week ahead — Economic data from Econoday.com:

“If the models are telling you to sell, sell, sell, but only buyers are out there, don’t be a jerk. BUY!!!” — William Silber, Ph.D.

1. China hikes interest rates — China raised its key interest rates for the third time since October, as inflation remained above 4% for the third month in a row. The benchmark one-year lending rate will increase to 6.06% percent from 5.81%, effective 2/9/11. The one-year deposit rate will rise to 3% from 2.75%.
2. Treasury readies housing solutions — the Treasury is set to release a report today laying out three possible solutions for winding down Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), but won’t endorse any specific option. The decision to present the three solutions without backing any one in particular came from the White House, which hopes to jumpstart a discussion on the topic without locking President Obama into a single course of action. The report’s three scenarios are: 1) No government role in housing, except for existing agencies like the FHA; 2) An explicit government guarantee of mortgages only when the market is in trouble; and, 3) A government role in the housing market at all times, but not through government-sponsored entities.
3. Ford to cut debt — Ford (F) announced it will cut its debt by another $3B by redeeming all of its outstanding 6.5% cumulative convertible trust preferred securities on March 15.
4. U.S. consumer sentiment rises in February — A gauge of consumer sentiment rose in February, reaching the highest level since June, according to poll results released Friday by Thomson Reuters and the University of Michigan.
The gauge hit 75.1, up from a final January reading of 74.2.
5. Egypt’s President Mubarak steps down — A day after refusing to step down, Egypt’s President Hosni Mubarak has resigned, according to media reports Friday. Mubarak has delegated Egypt’s affairs to the army, the Wall Street Journal reported, citing Vice President Omar Suleiman.

The week ahead — Economic data from Econoday.com:

“The greatest safety lies in putting all your eggs in one basket and watching the basket” — Gerald M. Loeb

1. Moody’s downgrades Egypt’s bond ratings — Moody’s Investors Service on Monday downgraded Egypt’s government bond ratings, citing the sharp increase in political risk following several days of anti-government protests.
2. Court rules against healthcare reform — a federal judge in Florida became the second U.S. judge to declare the healthcare reform law unconstitutional, marking the biggest legal challenge yet to federal authority to enact the law.
3. S&P cuts Ireland — S&P cut Ireland’s credit rating to A-/A-2 from A/A-1 this morning, and maintains a negative outlook uncertainty over how much additional capital the country’s banks will need.
4. Fed passes China on Treasury holdings — the Federal Reserve is now the top holder of Treasury securities, pushing China to the number two slot. According to recent data, the New York Fed’s holdings of Treasurys in its System Open Market Account total $1.1T vs. China’s $896B holdings and Japan’s $877B.
5. Debt ceiling debacle delayed, a little — the U.S. is on track to hit its $14.29T debt limit by the end of May, slightly later than originally forecast because tax revenues have been stronger than expected. Lawmakers from both sides of the aisle agree a default would be a ‘financial disaster,’ and an increase in the debt ceiling is nearly guaranteed, but Republicans (and some Democrats) are demanding cuts in government spending as the price of approving an increase.
6. Fitch downgrades Egypt credit ratings — Fitch’s more pessimistic stance on the Egyptian government’s ability to pay its sovereign creditors follows ratings cuts by Standard & Poor’s and Moody’s Investors Service. Fitch now pegs Egypt’s long-term foreign-currency issuer-default rating at double-B instead of double-B-plus. The outlook is negative.

The week ahead — Economic data from Econoday.com: