“It wasn’t raining when Noah built the ark” — Warren Buffett

1. S&P cuts Japanese auto outlook to negative — Standard & Poor’s Ratings Services cut its outlooks on six Japanese auto companies, including Toyota Motor Corp. (7203.TO, TM) and Honda Motor Co. (HMC, 7267.TO), to negative due to production cuts following the March earthquake and tsunami.
The move indicates the increased likelihood of a downgrade for the automakers and suppliers, who have struggled with parts shortages since last month’s disaster. A host of companies in the electronics, industrial and other sectors have face supply-chain problems in the wake of the catastrophe.
2. Misrata, Libya under rebel control — the battle for Libya continues to shake the Middle East as Gaddafi forces bombarded rebel troops along a ferociously contested strip of Misrata Sunday.
3. Greek deficit exceeds forecasts — Greece’s budget deficit in 2010 was 10.5% of GDP, significantly higher than estimated by either the Greek government or the EU. The latter had calculated a figure of 9.6% for 2010 and forecast the deficit would be 7.6% at the end of this year.
4. S&P slashes Japan outlook — S&P cut its outlook on Japan to Negative from Stable, and affirmed the country’s AA- rating, warning that the cost of last month’s earthquake will further hurt weak public finances unless divided politicians agree to raise taxes. Japan’s public debt, already double the size of its $5T economy, could increase even more to pay for reconstruction costs – estimated by S&P at ¥20-50T ($245B-$613B) vs. the government’s ¥16-25T estimate.
5. Bernanke navigates first ever conference — Ben Bernanke avoided any serious gaffes at the first ever post-FOMC press conference by a Fed Chairman. Bernanke said rates would stay at 0-0.25% for another “couple of meetings” at least. He also expects the end of QE2 in June to have little impact on markets.
6. EU opens CDS probe into 16 banks — the European Commission has opened two antitrust investigations into the market for credit default swaps. The probe includes 16 major U.S. and European banks, including JPMorgan (JPM), Barclays (BCS), HSBC (HBC) Citigroup (C) and Goldman Sachs (GS).

The week ahead — Economic data from Econoday.com:

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

1. S&P cuts U.S. rating outlook to negative — Standard & Poor’s cut its ratings outlook on the U.S. to negative from stable, sending a lightning bolt through the deficit-reduction debate in Washington and sending stock markets sharply lower.
2. Finnish election results threaten EU bailouts — Finnish voters have ousted their government and handed major gains to the True Finns anti-bailout party, placing a major doubt on Europe’s rescue funds for debt-ridden countries.
3. Bearish Sentiment Up for the Second Week in a Row — according the the latest poll by AAII, courtesy of the Bespoke Investment Group, bearish sentiment from Investors Intelligence rose for the second week in a row. At a level of 19.2%, however, current levels remain low by historical standards.

The week ahead — Economic data from Econoday.com:

“While markets often make double bottoms, three pushes to a high is the most common topping pattern.” — J. Bollinger

1. Mortgage servicers to pay foreclosure victims — the 14 largest mortgage servicers have come to an agreement with banking regulators and other authorities to pay back homeowners for losses they suffered from foreclosures or loans that were mishandled following the housing collapse. Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) are among the servicers affected.
2. Senate probe alleges Goldman mortgage deception — A Senate subcommittee has accused Goldman Sachs of selling poor quality mortgage securities it bet against and is pushing the Justice Department to investigate Goldman CEO Lloyd Blankfein’s testimony before Congress.
3. China GDP +9.7%, CPI +5.4% — Chinese inflation continued to strengthen in March as CPI accelerated to 5.4%, above expectations and the fastest pace since 2008. Q1 2011 GDP also beat forecasts in rising 9.7%, but this was slower than the 9.8% recorded for Q4 2010.
4. SEC close to deal with banks over role in crisis — the SEC is in negotiations with JPMorgan Chase (JPM) and other major banks to settle fraud allegations related to mortgage-bond deals that helped cause the financial crisis, according to officials.
5. Moody’s cuts Ireland’s ratings to Baa3 — Moody’s has cut Ireland’s sovereign rating by two notches to Baa3 and maintained a negative outlook.
6. Congress passes ‘$38B’ budget deal — the House and the Senate yesterday approved a $38B budget deal for the rest of the fiscal year. The House passed the bill by 260-167 and the Senate by 81-19.

The week ahead — Economic data from Econoday.com:

“In investing, the return you want should depend on whether you want to eat well or sleep well” — J Kenfield Morley

1. Moody’s downgrades Portugal on bailout fears — Moody’s cut Portugal’s rating by one notch to Baa1 from A3 and put the rating on review for a possible further cut. The move comes after Moody’s cut Portugal’s rating by two notches last month.
2. China Raises Interest Rates to Counter Inflation Pressure — China raised interest rates for the fourth time since the end of the global financial crisis to restrain inflation and limit the risk of asset bubbles in the fastest-growing major economy. The benchmark one-year lending rate will increase to 6.31 percent from 6.06 percent
3. European Central Bank hikes rates — The European Central Bank delivered its first rate hike to 1.25% from 1% since 2008 despite the euro zone’s newest debt woes in a bid to prevent rising inflation pressures from becoming entrenched.
4. Portugal seeks bailout, Europe debt crisis spreads — Portugal asked for a bailout to relieve its crushing debt, joining Greece and Ireland by becoming the third eurozone nation to seek outside help amid a bruising financial crisis.
5. Market Breadth Indicator shows short-term overbought — The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

6. Investor Fear Gauge — The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

The week ahead — Economic data from Econoday.com:

“Don’t confuse brains with a bull market” — Humphrey B. Neill (Investor)

1. Toyota restarts some Japan production — Toyota (TM) has resumed production at plants in Japan for the first time since the earthquake and tsunami brought manufacturing in the country to a complete halt. The carmaker began output at two factories that make three hybrid models and will gradually expand domestic production as its supply of parts recovers.
2. Japan mulls special tax for quake relief — The Japanese government is considering a special tax to help finance relief and recovery efforts in earthquake- and tsunami-hit Japan, according to a published report last Thursday.
3. G-8 to discuss nuclear safety — The Group of Eight industrialized countries will discuss nuclear safety and global safety standards for the industry at its next meeting in May.
4. Fed names banks that took emergency loans — the Fed identified the banks that utilized its discount window during the height of the financial crisis, with U.S. Bancorp (USB), Wachovia (now part of WFC), Morgan Stanley (MS) and several European banks among the largest users. U.S. Bancorp borrowed $3.35B on Sept. 10, 2008, Wachovia borrowed $29B on Oct. 6, Morgan Stanley borrowed over $3B on Oct. 9, and Washington Mutual took out a $2B loan on the day before it collapsed and another $2B the next day. On October 29, when lending peaked at $111B, Belgium’s Dexia took $26.5B and Germany’s Depfa $24.6B. Arab Banking Corp., which was then 29% part-owned by Libya, took 73 loans in an 18-month period, borrowing an aggregate of $35B.
5. Ireland to give banks another €24B — Ireland will pump another €24B ($34B) into its crippled banking sector as it again attempts to bring its three-year financial crisis to an end. The cash will come from Ireland’s emergency EU-IMF credit line and adds to €46.3B that the state has already pumped in. The government, which now controls almost the entire industry, intends to consolidate its holdings into two “pillar banks” based on market leaders Bank of Ireland (IRE) and Allied Irish Banks (AIB).
6. China’s factory-activity gains slow — HSBC’s privately compiled purchasing managers index rose to 51.8, falling below the long-run series average of 52.3, but up from February’s 51.7. Meanwhile, the government’s official PMI by the China Federation of Logistics & Purchasing rose to 53.4 in March, up from a reading of 52.2 in the previous month. However, this result was below a 54 forecast, according to a Reuters survey.
7. Plunge in 10 ETFs triggers “flash crash” memories — Nasdaq OMX Group Inc said it canceled trades in 10 new ETFs sponsored by Scottrade affiliate FocusShares, some of which briefly plummeted as much as 98 percent.
8. 2011 Q1 Performance — courtesy from the Bespoke Invest Group, below is the chart that shows key ETFs performance in Q1.

The week ahead — Economic data from Econoday.com:

“Stocks are super-attractive when the fed is loosening and interests are falling. In sum: Don’t fight the fed” — Martin Zweig

1. Oil climbs as coalition attacks Libya — no-fly zone has effectively been established over Libya, said Vice Admiral Bill Gortney from the Pentagon, and the coalition’s aerial attacks have driven back Gaddafi’s offensive against the rebel stronghold at Benghazi. The coalition, which includes the U.S., U.K., France, Canada, Qatar and several other nations, has amassed at least 25 ships off the coast of Libya.
2. Boeing successfully tests 747 — Boeing’s (BA) newest 747 passenger jet had a successful maiden test flight yesterday; assuming flight-test certification goes smoothly, Boeing expects to deliver the first of the jets by the end of the year.
3. Nissan to resume Japan production — Nissan (NSANY.PK) will become the first automaker to resume regular parts production and vehicle assembly in Japan following the country’s devastating earthquake.
4. Portugal bailout nears after PM quits— Portugal Prime Minister Jose Socrates resigned yesterday after the country’s parliament rejected a fourth austerity plan within a year. The move threatens to push already-high government borrowing costs to unaffordable levels and force Lisbon to seek a bailout.
5. Toyota to curb North America production after quake — Toyota (TM) expects to suspend manufacturing at some of its North American factories due to the shortage of parts from Japan following the devastating earthquake. The carmaker is unsure which facilities will be affected or how long the shutdowns will last.
6. China to tax rare earths — China will impose a tax on rare earth minerals, beginning April 1. The tax has been set at 60 yuan ($9.1) per ton of light rare-earth minerals, and 30 yuan per ton of medium-and heavy-rare earth minerals.
7. Sector Q1 Earnings Growth Estimates — according to Bespoke Investment Group, below is the chart of estimated year-over-year earnings growth for the first quarter for the ten S&P 500 sectors.

8. Fukushima No. 3 reactor core leaked — the core of the No. 3 reactor at Japan’s heavily damaged Fukushima Daiichi nuclear plant is likely the source of high-level radiation detected on Thursday, the government’s Nuclear and Industrial Safety Agency reportedly said Friday.

The week ahead — Economic data from Econoday.com:

“The usual bull market successfully weathers a number of tests until it is considered invulnerable, whereupon it is ripe for a bust” George Soros

1. Markets quake as Japan faces nuclear crisis — Markets in Japan and across the world extended their losses as a third explosion hit the Fukushima Daiichi nuclear complex. The Nikkei 225 fell as much as 14% before closing -10.6% at 8,605.15 while the broader Topix index ended -9.5%. The falls came as The Tokyo Electric Power battled to avert a nuclear catastrophe at Fukushima, with “minute levels” of radiation detected as far away as Tokyo. In efforts to stabilize markets, the Bank of Japan added ¥20 trillion ($245B) of short-term liquidity to the record ¥15 trillion it pumped in yesterday.
2. Gaddafi gains momentum, Saudi Arabia intervenes in Bahrain — The Libyan airforce has attacked rebels in the town of Ajdabiya, just 100 miles from the opposition capital of Benghazi, as Muammar Gaddafi moves closer to regaining full control of the country. Elsewhere, Saudi Arabian troops moved into Bahrain after a request from the kingdom to help quell a popular uprising.
3. Moody’s cuts Portugal’s debt rating — Portugal’s ability to avoid a fiscal bailout remained under question Wednesday after Moody’s Investors Service cut the nation’s long-term debt rating by two notches to A3 from A1.
4. FOMC: Economy on firmer footing, no mention of Japan — the FOMC left its benchmark interest rate at 0.25% yesterday, as expected, and signaled that it’s unlikely to expand its $600B bond purchase plan.
5. India hikes rates; inflation, growth risks cited — The central bank increased both its lending and borrowing interest rates by 25 basis points, to 6.75% and 5.75%, respectively.
In a statement accompanying its move on rates, the RBI recognized new risks emerging from rising crude prices and the turmoil gripping parts of the Mideast and North Africa.
6. Congress to extend budget negotiations — the Senate is poised to pass a sixth stop-gap bill to keep the government running, buying Congress until April 8 to work out a budget deal that should have been in place months ago.
7. G-7 intervention puts brakes on the yen — the yen has fallen today after the G-7 agreed to concerted intervention in the currency markets for the first time since 2000. The yen, which was at 81.46 to the dollar midday in Europe, had surged to a record 76.25 yesterday in response to the earthquake, tsunami and nuclear crisis in Japan. This sparked fears about the country’s ability to use exports to help its economy recover from the triple blow. The Bank of Japan started proceedings with a reported purchase of $25B and was followed by its counterparts in the U.K., France and Germany.
8. U.N. approves Libya action; oil volatility to continue — the U.N. Security Council, by a vote of 10-0 with 5 abstentions, authorized yesterday evening a no-fly zone in Libya and approved ‘all necessary measures’ to protect Libyan civilians.
9. Individual Investor Sentiment Drops — According to this week’s survey from the American Association of Individual Investors (AAII), bullish sentiment now stands at 28.5%. This is the lowest optimism has been since August 26, 2010. It is also the fourth consecutive week that bullish sentiment has been below its historical average of 39%.

The week ahead — Economic data from Econoday.com:

“Buy when you are scared to death; sell when you are tickled to death” — Market Maxim (Cabot Letter)

1. Nikkei tumbles 6.2% yen whipsaws in quake aftermath — the Nikkei closed -6.2% today to 9,620 on record volume of 4.88B shares, as investors had their first extended opportunity to sell Japanese stocks since the 8.9 magnitude earthquake on Friday. The Bank of Japan overnight offered to inject a record ¥7T ($183B) into money markets, and may further ease its ultra-loose monetary policy.
2. Moody’s cuts Greece rating, stokes debt fears — Moody’s Investors Service cut Greece’s sovereign-debt rating Monday by three notches to B1, infuriating the Greek government and temporarily denting the euro amid renewed worries about the ability of Greece and other debt-loaded euro-zone governments to avoid default.
3. Moody’s cuts Spain’s credit rating — the rating was downgraded one notch to Aa2 from Aa1, bringing it in line with the rating offered by Standard & Poor’s. Moody’s put the new rating on negative outlook, a signal that a further cut is possible.
4. US trade gap widens 15.1% in January — the U.S. trade deficit widened sharply in January to the highest level since the summer, as a surge in imports overwhelmed record levels of exports.
5. China posts trade deficit as exports slow — China unexpectedly posted a trade deficit in February. The slowdown swung the country’s trade balance to a deficit of $7.3 billion in February, more than offsetting January’s $6.5 billion trade surplus and giving China a net trade deficit in the first two months of the year.
6. Pimco sells off all US government holdings — The world’s largest bond investor has sold off all his fund’s U.S. government-related holdings, according to a published report. Bond giant Pimco confirmed it has unloaded all of its U.S. government holdings, including Treasurys, in the Total Return Fund. The $237B fund previously had 12% of its assets in U.S. government holdings, and had as much as 63% of its assets in U.S. government-related debt in late 2009. Bill Gross, the fund’s manager, is trying to get out ahead of the end of QE2, when he expects a rise in bond yields, and a concurrent fall in bond prices, would drive down the value of the fund’s holdings.
7. Libya’s oil terminal blazes — Gaddafi’s forces initiated air and artillery strikes on some of Libya’s oil facilities. The country’s largest crude processing plant was hit, while the nation’s largest oil terminal, at the port of Sidra, is in flames.

The week ahead — Economic data from Econoday.com:

“I never buy at the bottom and I always sell too soon” — Barron Rothschild

1. China lowers growth target — China plans to lower its growth targets, as Premier Wen Jiabao says the country wants to avoid “unsustainable growth featuring industrial overcapacity and intensive resource consumption.” The official target for average GDP growth over the next five years will be 7%, down from the previous target of 7.5%.
2. Moody’s: €50 billion shortfall for Spain’s banks — Moody’s Investors Service on Monday said Spain’s banks could need up to €50 billion in recapitalization funds. That’s higher than the government’s own estimate that a maximum of €20 billion in recapitalization funds is needed and Moody’s prior estimate of €17 billion that it calculated at end-2010.
3. India’s economic growth slows to 8.2% — India’s economic growth slowed to 8.2% in the last three months of 2010 from the year-earlier period, as the manufacturing sector was held back in the wake of multiple interest-rate increases by the central bank amid rising prices.
4. U.K. freezes Gadhafi assets — The U.K. government said Sunday that it has frozen the assets of Libyan leader Moammar Gadhafi along with five of his children and people acting on their behalf, in line with a United Nations Security Council resolution.
5. Libyan rebels allow oil shipments to resume — Libyan rebels took control of a key city near Tripoli on Sunday, declared a provisional government and allowed oil shipments to resume in areas under their territory. There have been no oil shipments from the eastern territory in more than a week.
6. SEC probes bank lending — the SEC has asked for information from an unknown number of community and regional banks with large concentrations of commercial real estate loans. Regulators are reportedly trying to determine whether the banks restructured troubled loans in order to make them appear healthier than they really are, using a practice known as ‘extend and pretend’ or ‘amend and pretend.’
7. Beige Book: Continued expansion, climbing costs — in the latest Beige Book, all 12 Federal Reserve Districts reported overall economic activity continued to expand at a modest to moderate pace in January and early February, and 11 of 12 saw ‘solid growth in manufacturing production.’ Labor market conditions continued to ‘strengthen modestly’ in all districts.
8. European Central Bank President Jean-Claude Trichet warned Thursday that the bank could move as early as next month to hike interest rates in order to keep rising food and raw-material prices from stoking inflation.

The week ahead — Economic data from Econoday.com:

“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: