Morning Note...

Sorry, little late today… Futures are flat this morning as CPI data is largely in-line with expectations (and the headline read is “non-inflationary”), Initial Jobless Claims were in-line, and markets shrug off renewed concerns over Greece’s proposed bailout.  Month-over-month CPI was flat (0.0%) vs. the +0.1% expectation.  Year-over-year, Consumer Prices were +2.1% vs. the +2.3% expectation.  Initial Jobless Claims for the week ending March 13^th were 457k vs. the 455k estimate.  Continuing Claims were 4.579M vs. the 4.522M estimate.  In Europe, markets are mixed on concerns Greece won’t receive EU aid and will need its bailout to come from the IMF instead.  In corporate news, last night’s earnings from Nike (NKE) and Guess (GES) impressed, and Ross Stores (ROST) reported in-line.  Additionally, video game retailer GameStop (GME) is up 7% after posting earnings this morning.  Bellwether global shipper FDX is trading lower after posting lighter-than-expected earnings. 

Three things to watch heading into the weekend:  1) quad witching 2) S&P rebalance 3) possible healthcare bill vote in the House.  From the cheap seats, market action continues to feel “squeezy,” in the sense that money managers may continue to feel pressure to “chase the tape” and get involved in the rally for career risk reasons as much as anything else… Philly Fed data and LEI data is due at 10am.  One other reminder – the NCAA tournament starts at noon today…watch volumes after it begins…

BTIG’s Mike O’Rourke had some intelligent thoughts on recent market action and “big picture” cash levels:

Money Market fund assets are poised to drop below $3 Trillion for the first time since 2007.   Traditionally, this would be considered a major milestone and a concern that the equity market is too giddy.  As most market participants know, most of the domestic equity mutual funds have not been the beneficiary of this cash coming off the sidelines.  The undisputable beneficiary has been the bond market.  Bond funds have experienced record inflow for over a year and “Direct” bids have become more and more commonplace with every Treasury auction. 

In the equity market, vanilla domestic fund managers find themselves with few options.  The primary alternative is to sell XYZ to buy ABC.  It is illustrated by how long investors had to wait for the Dow Industrials to finally provide today’s Dow Theory confirmation of the recent highs in the Dow Transports.  If one looks at the year to date returns among major indices, it sums the action up, managers are using large caps as a source of funds.  The Russell 2000 is up 9.4%, the S&P 500 is up 4.6%, the S&P 100 is up 3.6% and the Dow Industrials are up 2.9%.  Another comparison is the S&P 500 Equal Weight is up 7.7%, outperforming The S&P 500 by 311 basis points.  As managers gain confidence in the recovery, the Dow Industrial Average has lagged as have large cap liquid names like its constituency.  These stocks are being sold so managers can rotate more broadly out in the risk spectrum as recovery prospects improve.  This tactic could be a big winner if the recovery remains on track and if the fund flows just start reverting from these historic extremes.

For the politicos, this caught my eye this morning:

Obama’s Job Disapproval Rating Tops Approval: 2010-03-18 04:00:15.0 GMT  By Brendan Moynihan

March 18 (Bloomberg) -- As President Barack Obama enters his final drive for congressional passage of health-care reform, the number of Americans who don’t like the job he’s doing has climbed above the level who approve for the first time. The CHART OF THE DAY shows the convergence in Gallup’s daily tracking polls since the first one was conducted Jan. 21- 23, 2009. Obama’s negative rating was at its lowest level in the first poll and rose to 47 percent today, compared with 46 percent who approve. The number of Americans saying Obama is doing a good job peaked just after his first 100 days, according to Gallup. That coincided with a party-line congressional vote passing his budget blueprint allowing for fast-track clearance of the health-care overhaul. As opposition mounted during the summer, his rating plumbed new lows. The Quarterly Bloomberg Global Poll of subscribers also found a decline in Obama’s overall favorability rating one year after taking office. He was viewed favorably by 27 percent of U.S. investors in the poll conducted Jan. 19, 2010, down from 32 percent in October and from 49 percent in July. Gallup on Jan. 21, 2009, began tracking daily the percentage of Americans who approve or disapprove of the job Obama is doing as president. Each result is based on a three-day rolling average.

UPGRADES include: Burger King (BKC) upgraded to Buy from Hold at Deutsche Bank...MedCath (MDTH) upgraded to Buy from Hold at Deutsche Bank...LSI Corp (LSI) upgraded to Buy from Hold at Kaufman Bros...Broadcom (BRCM) upgraded to Buy from Neutral at Goldman...Advanced Micro (AMD) upgraded to Sell from Conviction Sell at Goldman...Energizer (ENR) upgraded to Overweight from Neutral at JP Morgan...Corning (GLW) upgraded to Overweight from Market Weight at Thomas Weisel...Brown-Forman (BF.B) upgraded to Neutral from Sell at UBS...Avis Budget Group (CAR) upgraded to Overweight from Equal Weight at Barclays...DOWNGRADES: Athenahealth (ATHN)  downgraded to Underperform from Perform at Oppenheimer...LSI Corp (LSI) downgraded to Neutral from Buy at Goldman...Northwest Pipe  (NWPX) downgraded to Hold from Buy at Jefferies...PetMed Express (PETS) downgraded to Neutral from Overweight at Piper Jaffray...WNS Holdings (WNS) downgraded to Neutral from Buy at Janney Montgomery...Schiff Nutrition (WNI) downgraded to Neutral from Buy at B. Riley ...Ventas (VTR) downgraded to Underperform from Neutral at RW Baird...INITIATIONS: SuperMedia (SPMD) initiated with an Outperform at Oppenheimer...Penn National (PENN) initiated with a Buy at Deutsche Bank...Pinnacle Entertainment (PNK) initiated with a Buy at Deutsche Bank ... NASDAQ OMX (NDAQ) initiated with an Outperform at JMP Securities...NYSE Euronext (NYX) initiated with a Market Perform at JMP Securities...Wabash (WNC) initiated with a Buy at Sterne Agee.

Asia mixed overnight.  Europe mixed.  USD +47bps.  Oil -70bps.  Gold +6bps. 

S&P 500 PreMarket 8:30am (last/% change prior close/volume): 

GAMESTOP CORP-A        21.50    +8.26% 403754

CARDINAL HEALTH         37.25    +4.96% 550

NIKE INC -CL B               73.50    +3.7 %  131514

XL CAPITAL LTD-A          18.76    -3.6 %  400

DU PONT (EI)                 37.55    +2.9 %  88444

BOSTON SCIENTIFC       6.75      -2.88%  134148

FEDEX CORP                  87.60    -2.45%  826322

TESORO CORP               14.50    +1.97% 11077

MBIA INC                       6.05      +1.85% 10500

BROADCOM CORP-A       34.20    +1.76% 55984

WENDY'S/ARBY'S-A        4.90      +1.66% 600

Today’s Trivia:  U.S. Education Secretary (and former college & pro player) Arne Duncan said that college basketball teams with less than a 40% graduation rate should be banned from the NCAA Tourney which starts today.  Of the field of 64, how many teams would that knock out if it were actually enforced? 

Yesterday's Answer:   Smithwick’s (1710) is the oldest beer in Ireland, and if ever you go to order one, drop the “w.”  Put on your best Irish brogue and ask for a “Smiddicks.”  As for the bonus question, apparently Bill Clinton is partial to Murphy’s Irish Stout, which is a bit smoother and sweeter than Guinness or Beamish. 

Best Quotes:  All I can say about this is “wow:”

North Korea Executes Official Over Currency Debacle 2010-03-18 06:20:43.880 GMT By Bomi Lim

March 18 (Bloomberg) -- North Korea executed an official of the ruling party last week, holding him responsible for unrest sparked by a botched currency revaluation aimed at reasserting the regime’s grip on power, according to media reports. Pak Nam Gi, who was fired earlier this year from his post as Workers’ Party head of finance and planning, was shot in Pyongyang for intentionally harming the country’s economy, Yonhap News reported, citing people it didn’t identify. Free North Korea Radio, run by North Korean defectors in Seoul, yesterday reported widespread rumors of the execution. The reported execution is the latest sign of efforts by Kim Jong Il’s government to appease the public after the currency revaluation fueled inflation, worsened shortages of goods and food, and decimated savings. Premier Kim Yong Il made a rare apology after the currency was devalued between Nov. 30 and Dec. 6, and the sum that could be exchanged for new notes capped, Seoul-based rights groups including Good Friends said. “North Korea must have needed a political scapegoat to take the fall after discontent seeped through every corner of society,” said Paik Hak Soon, director of inter-Korean relations at the Seongnam, South Korea-based Sejong Institute. “The killing may initially conciliate the public. More important is whether the government can ultimately solve the problem of goods shortages.”