Last Call: Markets Wind Down

By: Tom Rotunno

Market Musings With Earnings Impresario Juan Aruego:

Bad news: Major indexes posted their biggest losses in over 3 weeks.

Good news: The Dow was only down 90 points or 0.6% and the S&P dropped just 0.8%.

Bad news: The Dow and S&P 500 are on track for their worst weeks of the year.

Good news: The blue chips are still up 2.6% this month, while the Nasdaq and S&P are both up about 2%.

Bad news: Cyprus continues to inspire selling despite decent weekly jobless claims and another dose of good housing data.

Good news: The bears aren't generating a lot of trades. Volume on the major stock exchanges remained below average.

Quick Hits

Raj Rajaratnam's brother indicted for insider trading.

Treasury Secretary Lew, financial-services CEOs talk cyber security.

Global box office up 6% to $34.7 billion last year - trade group.

The Word on the Street Tonight

Nike Shares Pop 8% After Earnings Beat/Reuters: "Nike on Thursday posted a quarterly profit that handily beat Wall Street's expectations and said future demand for its apparel and shoes rose. The athletic apparel maker's shares rose more than 8 percent after the closing bell, following the news."

Cyprus Rushes Bailout Plan, Bank Lines Grow/AP: "Cypriot politicians moved Thursday to restructure the country's most troubled bank as part of a broader bailout plan that must be in place by Monday to avoid financial ruin. Concerned customers rushed to get cash from ATMs as bank employees protested. Cyprus has been told it must raise 5.8 billion euros ($7.5 billion) if it is to receive 10 billion euros ($12.9 billion) from its fellow euro zone countries and the International Monetary Fund. If it does not find a way by Monday, the European Central Bank said it will cut off emergency support to the banks, letting them collapse. That would throw the country into financial chaos and, ultimately, cause it to leave the euro zone, with unpredictable consequences for the region. Several new bills were being submitted to Parliament Thursday night, including restructuring the banking sector, setting up an "Investment Solidarity Fund" and restricting banking transactions in times of crisis. Together, they will make up at least part of the alternative plan Cyprus hopes will secure it bailout money. The lawmakers said the bills would be discussed and potentially voted on Friday morning."

FCC Chairman Genachowski to Step Down/WSJ: "Federal Communications Commission Chairman Julius Genachowski, the top regulator of U.S. telecom companies, is set to announce Friday that he will step down, an FCC official and an industry official said Thursday. Mr. Genachowski's office declined to comment. Mr. Genachowski was appointed to the commission in 2009 by President Barack Obama. He has overseen efforts to expand broadband coverage in the U.S. and respond to the proliferation of smartphones. His successor has yet to be named by the White House. The chairman's departure will make the FCC short one Democrat and one Republican after Robert McDowell, the senior Republican on the five-member commission, announced he was stepping down this week. Their replacements require Senate confirmation."

Apple Design Teams Get Cozier/WSJ: "Last October Apple Inc. announced a management shake-up designed to increase collaboration across its different divisions. Sure enough, some walls have come down, though many others remain. One of the biggest areas of change has been design. For years, even the esteemed designers of Apple's mobile iOS operating system, were cut out of the loop on specifics related to new mobile devices their software would be running on, according to several people familiar with Apple's process. Apple's industrial design team, led by Jonathan Ive, tapped its own stealth group of software developers to help with prototypes. That dynamic is changing, according to the people close to the company. The stealth software developers still exist. But now, Apple's mobile software, or "human interface" team, which has been led by executive Greg Christie, is being briefed about industrial prototypes earlier, these people said. The person described the change as "a thawing."

The U.S. Defense Department Still Loves BlackBerry, It Says/Biz Insider:"Reports that the DoD is ditching BlackBerry for Apple and buying 650,000 iOS devices just aren't true, the DoD says. If DoD employees want a BlackBerry 10 when the device becomes available, they can have one, spokesperson Lt. Col. Damien Pickart told PC Magazine's Damon Poeter. If they want an iPhone or an Android phone, they can have those, too. Pickart says the DoD currently supports more than 600,000 mobile devices between those in the field and the ones in various pilot programs. The breakdown is: 470,000 BlackBerry devices, 41,000 iOS devices, and 8,700 Android devices, Poeter reports."

Web Money Gets Laundering Rule/WSJ: "The U.S. is applying money-laundering rules to "virtual currencies," amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities. The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000. Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else's behalf would be subject to new scrutiny, said proponents of Internet currencies. ... One of the fastest-growing alternative cash products is Bitcoin, an online currency launched in 2009 that isn't backed by a central bank or controlled by a central administrator. Currency units, known as "bitcoins" and consisting of a series of numbers, are created automatically on a set schedule and traded anonymously between digital addresses or "wallets." Certain exchange firms buy or sell bitcoins for legal tender at a rate that fluctuates with the market. ... Bitcoins can be used in a host of legitimate transactions-for example, website Reddit allows users to upgrade services using bitcoins and blog service Wordpress.com's store accepts them as a form of payment. Pizzaforcoins.com also lets bitcoin savers pay for deliveries through Domino's and other pizzerias. On the other hand, at least one online service takes bitcoins as payment for illegal drugs, according to a Federal Bureau of Investigation report last year. Bitcoin's backers point out that criminals will use any currency for money laundering or illegal purchases."

Does Bernanke Have the Right Strategy for Fixing the Economy?/CNBC:"...Interestingly, while the inflation rate has remained subdued, so have market-price indicators, such as gold, the dollar, and commodity indexes. The suggestion here is that Bernanke, rather than mounting a high-inflation policy, has been avoiding deflation. At the end of the day, the Federal Reserve is not the engine of growth. Low tax rates, light regulation, and limited government spending create the incentives for more rapid economic expansion and prosperity-inducing opportunities. But if I have this story right, the market monetarists want the central bank to enforce a nominal GDP growth rule, which will avoid both deflation and inflation, and thus give fiscal incentives breathing room for a more rapid job-creating expansion. I don't agree with Bernanke's unemployment target or his criticism of lower government spending. But I confess that he may have the monetary-stability story more right than I originally thought. If gold remains soft, and the dollar steady, perhaps the former Princeton professor deserves a little more credit. He may have gotten that story right."

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