How the major stock indexes fared on Friday

The stock market eked out a gain Friday as investors took downbeat economic news in stride. The modest gains still left stocks with a loss for the week but the Dow Jones industrial average and the Standard & Poor's 500 index logged their best month since November. The latest bad news came from several corners including the financial industry. Insurer American International Group Inc. reported a larger than expected fourth-quarter loss. But the government reported that the nation's economy grew at a faster pace than initially estimated for the end of 2009.

The Dow rose 4.23, less than 0.1 percent, to 10,325.26.

The S&P rose 1.55, or 0.1 percent, to 1,104.49.

The Nasdaq composite index rose 4.04, or 0.2 percent, to 2,238.26.

For the week:

The Dow is down 77.09, or 0.7 percent.

The S&P is down 4.68, or 0.4 percent.

The Nasdaq is down 5.61, or 0.3 percent.

For the year:

The Dow is down 102.79, or 1 percent.

The S&P is down 10.61, or 1 percent.

The Nasdaq is down 30.89, or 1.4 percent.

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Berkshire Profit Jumps to $3.1 Billion on Derivatives

By Andrew Frye and Jamie McGee

(Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. said fourth-quarter profit jumped on the recovery of derivative bets tied to the world’s stock markets.

Net income rose to $3.06 billion, or $1,969 a share, from $117 million, or $76, in the same period a year earlier, the Omaha, Nebraska-based company said today in its annual report.

The profit increase, Berkshire’s third straight, helps rebuild a cash pile that diminished since 2007 as Buffett invested in financial firms bruised by the recession. Companies including Goldman Sachs Group Inc. that turned to Buffett for funding are paying Berkshire interest of 10 percent or more. The shopping spree culminated with the November agreement to buy railroad Burlington Northern Santa Fe for $27 billion.

“We’ve put a lot of money to work during the chaos of the last two years,” Buffett said in his letter to shareholders today. “It’s been an ideal period for investors: A climate of fear is their best friend.”

Berkshire had net income of $8.06 billion for all of 2009, a 61 percent gain from the year before. Rising stock prices helped boost book value to $131.1 billion, a 4 percent increase since Sept. 30. The figure climbed about 20 percent from the end of 2008. Buffett typically highlights book value, the measure of assets minus liabilities, in the first sentence of his annual letter to shareholders.

Derivative Gains

Derivatives added $1.05 billion to earnings in the quarter, compared with a loss of $4.61 billion a year earlier after the collapse of Lehman Brothers Holdings Inc. Liabilities on Buffett’s so-called equity-index puts narrow when four stock indexes, including the Standard & Poor’s 500, climb closer to the levels they were at when Buffett made the deals near the market’s peak in 2006 and 2007.

Berkshire’s own stock has gained 52 percent in the past year as derivatives rebounded and the value of the firm’s top stocks rose. The Class A shares closed yesterday at $119,800, their highest since Oct. 21, 2008.

The 20 largest holdings in its U.S. portfolio all increased in value in the past 12 months. Coca-Cola Co., Berkshire’s top holding, climbed 29 percent on the New York Stock Exchange. Wells Fargo & Co. doubled and American Express Co. tripled. The U.S. portfolio was valued at $57.9 billion at Dec. 31, a 12 percent rise from a year earlier.

NetJets Loss

The NetJets unit, which leases planes to corporate customers and individuals, posted a $180 million pretax loss for the quarter, bringing the full-year deficit to $711 million on asset writedowns and the cost of cutting staff.

“NetJets is likely to operate at a profit in 2010, assuming there is no further deterioration in the U.S. economy or negative actions directed at the ownership of private aircraft,” Berkshire said in today’s report. The unit earned $213 million in 2008.

Buffett cut jobs and reshuffled managers at Berkshire’s operating companies last year as retail and industrial demand suffered in the recession. He replaced the CEOs of NetJets and jeweler Helzberg Diamond Shops Inc. Earlier this month, Berkshire reported its workforce fell by 9.8 percent since the end of 2008 to 222,000 employees. The total is about 257,000 with the addition of railroad staff.

Buffett’s firm joined the S&P this month after completing the takeover of Fort Worth, Texas-based Burlington Northern and splitting Class B shares 50-for-1 to facilitate the deal. The move prompted managers of funds that attempt to recreate the returns of the index to add Berkshire to their portfolios.

Berkshire had $30.6 billion in cash as of Dec. 31, compared with $26.9 billion three months earlier. Buffett used about $8 billion of that cash this month to help fund the rail deal.

‘We Sleep Well’

“We pay a steep price to maintain our premier financial strength,” Buffett said in the letter. “The $20 billion-plus of cash-equivalent assets that we customarily hold is earning a pittance at present. But we sleep well.”

Buffett spent $1.86 billion on fixed-maturity securities and $1.37 billion on equities in the quarter. Berkshire sold $1.12 billion in fixed maturities and $3.5 billion in equities to help fund the rail deal. In 2009, the company bought $10.8 billion in fixed-income maturities, compared with a $35.6 billion purchase in the previous year.

Buffett added a $2.6 billion investment in Swiss Reinsurance Co., completed in March, to a portfolio of financing deals that he struck during the credit freeze as other investors were withholding funds. The Swiss Re transaction pays a 12 percent coupon, while Berkshire gets 10 percent annually on its $5 billion injection in Goldman Sachs and its $3 billion of preferred shares in General Electric Co., investments from 2008.

Reinsurance

Investment income, which includes stock dividends and the interest payments from GE, Swiss Re and others, fell about 4 percent to $1.7 billion at Berkshire’s insurance and finance operations.

Berkshire, which owns National Indemnity, General Re and Geico, said profit from underwriting insurance policies fell 71 percent to $535 million. Net income from Berkshire Hathaway Reinsurance Group fell 80 percent to $270 million in the fourth quarter as Buffett scaled back sales.

Profit at Shaw, the world’s largest carpet manufacturer, fell 65 percent to $8 million as sales to residential customers declined in the fourth quarter. Profit at furniture stores, jewelry shops and the candy business advanced 24 percent to $113 million.

Marmon Holdings Inc., the collection of more than 100 businesses purchased by Berkshire from the Pritzker family last year, reported that profit declined 19 percent to $160 million. The unit’s operations include manufacturing, leasing railroad tank cars and making wire and cable products.

Derivative Bets

Buffett sold the equity derivatives to undisclosed buyers for $4.9 billion, according to the 2008 letter to shareholders, and can invest the cash and keep any profit even if he loses the bet. If the four indexes covered by the contracts are at zero when the agreements expire, the losses would be $38 billion, the firm said today, a figure that can change as currencies fluctuate. The total was $38.6 billion on Sept. 30.

The four indexes -- the S&P, the U.K.’s FTSE 100 Index, the Dow Jones Euro Stoxx 50 Index and Japan’s Nikkei 225 Stock Average -- rose in the fourth quarter.

Berkshire has also sold credit-default swaps on individual companies, and contracts that require the firm to pay when credit losses occur at borrowers included in high-yield bond indexes. The maximum Berkshire would still have to pay on agreements tied to the indexes is about $5.5 billion, the firm said today.

Sanofi-Aventis, Tesco

Buffett disclosed increased stakes in drugmaker Sanofi- Aventis SA and Tesco Plc, Britain’s largest retailer in the regulatory filing. Berkshire’s holdings of Sanofi-Aventis rose about 14 percent to 25.1 million shares and the stake in Tesco rose 3.1 percent to 234.2 million shares. Berkshire owned 1.9 percent of Sanofi and 3 percent of Tesco, as of Dec. 31.

Berkshire was stripped of its last remaining AAA credit grade from a major rating firm this month when Standard & Poor’s downgraded Berkshire. The cut, which followed reductions last year by Fitch Ratings and Moody’s Investors Service, came as Berkshire neared the completion of the Burlington Northern takeover.

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Warren Buffett has said the hundreds of billions of dollars of taxpayer-funded bailouts of corporate America will eventually pay off.

But he thinks they shouldn't pay off for the wealthy people whose carelessness or ignorance made them necessary.

In his annual letter to shareholders of his Berkshire Hathaway Inc, Buffett offered acerbic criticism of financial industry chiefs and directors whose poor risk control nearly ran their companies into the ground.

He said that while these often-wealthy individuals "still live in grand style," it is the ordinary shareholders who have borne most of the burden of such failures, sometimes seeing more than 90 percent of their holdings wiped out.

Buffett said the four biggest "financial fiascos" in the last two years cost shareholders north of $500 billion. That's roughly the gross domestic product of Indonesia: population, around 240,000,000.

"A board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control," Buffett wrote.

"If he's incapable of handling that job, he should look for other employment," he went on. "If he fails at it -- with the government thereupon required to step in with funds or guarantees -- the financial consequences for him and his board should be severe."

Buffett did not identify the companies he was referring to. His office did not immediately return a request for comment.

But there is no shortage of financial companies where shareholders' investments fell by more than 90 percent.

Among them: American International Group Inc, Bear Stearns Cos, Citigroup Inc, Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc and Washington Mutual Inc.

"He took the gloves off, asking for a pound of flesh from those who saw their own personal finances hold up largely undiminished while they wiped half a trillion dollars from the nation," said Thomas Russo, a principal at Gardner, Russo & Gardner in Lancaster, Pennsylvania. It owns Berkshire stock.

BERKSHIRE: 'TOO BIG TO FAIL' NOT A FALLBACK

Some companies are now trying to tie executive pay closer to longer-term performance, good and bad.

Scott Alvarez, general counsel of the Federal Reserve, this week said the central bank expects soon to issue final guidance on pay practices intended to stop excess risk taking at banks.

"Compensation practices were not the sole cause of the financial crisis, but they were a contributing cause," he said.

Buffett agrees that deterrence matters. "CEOs and, in many cases, directors have long benefited from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well," he wrote.

Some CEOs have taken steps that could lessen potential shareholder and political fallout.

Citigroup Chief Executive Vikram Pandit is taking a $1 salary to run that bank. But he also has $79.7 million sitting in an account tied to his 2007 sale of his hedge fund firm, a Friday proxy filing shows. Pandit's compensation at Citigroup was roughly $38.2 million in 2008.

Buffett takes a $100,000 annual salary to run Berkshire. As the world's second-richest person, he can afford to do that.

"There is nothing new about corporate America committing atrocities against stockholders," said Frank Betz, a principal at Carret/Zane Capital Management LLP in Warren, New Jersey. "But CEOs now get paid so much more than the rank-and-file."

Yet even Buffett's risk management sometimes comes into question, as in 2008 when Berkshire suffered billions of dollars of paper losses on derivatives contracts tied mainly to the performance of various stock market indexes.

That bet looked better in 2009, resulting in $3.62 billion of pre-tax gains. But Berkshire derivatives provide $6.3 billion of premiums that Buffett can invest as he wishes. And the bets will pay off if the stock indexes rise over long time periods, as they usually do, notwithstanding the last decade.

Buffett maintained he would not overextend Berkshire.

"Too-big-to-fail is not a fallback position at Berkshire," he wrote. "We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses."

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Peru's Main Stock Indexes End Lower, Sol A Bit Stronger

Peru's main stock-market indexes ended lower Monday, dragged down by lower base metals prices.

The Lima Stock Exchange's broad General index was down 0.23% to close at 14,414.00. The selective blue-chip index was down 0.31% ...

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How the major stock indexes fared on Friday

The stock market paused from a four-day rally Monday and closed modestly lower after big consumer companies gave a cautious outlook for economic growth.

The market fluctuated after Lowe's Cos. and Campbell Soup Co. reported higher earnings but reminded investors that a recovery among consumers is expected to be slow.

The Dow Jones industrial average fell 18.97, or 0.2 percent, to 10,383.38.

The Standard & Poor's 500 index fell 1.16, or 0.1 percent, to 1,108.01.

The Nasdaq composite index fell 1.84, or 0.1 percent, to 2,242.03.

For the year:

The Dow is down 44.67, or 0.4 percent.

The S&P is down 7.09, or 0.6 percent.

The Nasdaq is down 27.12, or 1.2 percent.

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Crude Oil Rises to Six-Week High Above $80 on Total Strike

Crude oil followed gasoline to a six-week high as strikes at Total SA refineries and depots in France boosted prices of refined products.

Oil settled above $80 a barrel for the first time since Jan. 12 as gasoline futures gained 1.4 percent. Total, Europe’s biggest refiner, reported “sporadic” fuel shortages at some gasoline stations in France. U.S. refineries operated below 80 percent of capacity for the five weeks through Feb. 12, according to Energy Department data.

“The Total strike is really the predominant thing,” said John Kilduff, a partner at Round Earth Capital, a New York-based hedge fund that focuses on food and energy commodities. “When you have that coupled with the situation in the U.S. with the low run rates, it’s constructive for the overall market.”

Crude oil for March delivery increased 35 cents, or 0.4 percent, to settle at $80.16 a barrel on the New York Mercantile Exchange. The March contract expired at the close of floor trading today. The more-active April contract gained 25 cents, or 0.3 percent, to $80.31.

Gasoline for March delivery rose 3.01 cents, or 1.4 percent, to $2.1158 a gallon, the highest settle since Jan. 11.

Workers at Total’s six French oil-processing plants and six of its 31 storage depots have been on strike since last week to protest against the permanent shutdown of refining at its Flanders plant in northern France.

Total will meet with unions tomorrow in an effort to end the dispute, Michael Crochet-Vourey, a spokesman for the Paris- based company, said in a telephone interview today.

Refinery Runs

The strike comes as weak demand has curtailed refinery production worldwide. The utilization rate at U.S. refineries fell to a 16-month low of 77.7 percent in the week ended Jan. 29, according to Energy Department data.

Crude futures climbed 7.7 percent last week as U.S. Commodity Futures Trading Commission data showed that hedge-fund managers and other large speculators increased bets on rising prices for the first time since mid-January.

Speculative net-long positions, the difference between orders to buy and sell the commodity, jumped 63 percent to 68,436 contracts on the New York Mercantile Exchange in the week ended Feb. 16, the CFTC said in its weekly report on Feb. 19. It was the first increase since the week ended Jan. 12.

Oil rebounded after dropping as much as 0.5 percent in intraday trading as the dollar erased gains. Advances in the dollar make oil and other commodities less attractive as an alternative investment.

Dollar Steady

The U.S. currency traded at $1.3612 against the euro at 2:57 p.m. in New York, little changed from Feb. 19. The dollar reached $1.3444 the same day, the highest level since May.

“There are solid reasons for the market to fall with the stronger dollar and winter demand coming to an end,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London.

China, the world’s second-biggest energy consumer after the U.S., processed 29 percent more crude oil in January than a year earlier as the economic recovery spurred demand, the China Petroleum & Chemical Industry Association said today.

Crude oil processing volume reached 30.14 million metric tons (228 million barrels) last month while oil-product output increased 24 percent to 18.59 million tons, the industry body said on its Web site.

The International Energy Agency forecast earlier this month that global oil demand growth in 2010 will be driven entirely by economies outside the Organization for Economic Cooperation and Development, including China.

OECD Demand

OECD countries are forecast to consume 45.5 million barrels a day in 2010, the IEA said on Feb. 11. That’s the same level as last year, even though the International Monetary Fund has raised its economic growth outlook for the region. Oil demand in non-OECD countries, where economic expansion is forecast at 6.1 percent, is estimated to rise 4 percent this year.

“OECD demand just doesn’t support” the $80 price, said Kyle Cooper, a managing director at energy consultant IAF Advisors in Houston. “The market is still bumping up against very, very poor actual numbers in the OECD versus optimism about the emerging markets. That’s why the market is having trouble maintaining a serious direction.”

Brent crude for April settlement gained 42 cents, or 0.5 percent, to $78.61 a barrel on the London-based ICE Futures Europe exchange, the highest price since Jan. 12.

Oil volume in electronic trading on the Nymex was 395,717 contracts as of 2:56 p.m. in New York. Volume totaled 731,090 contracts Feb. 19, 22 percent above the average of the past three months. Open interest was 1.3 million contracts.

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Oil to Ease This Week as Caution Prevails: Survey

Oil prices are set to ease slightly this week, a CNBC survey showed. Analysts polled were a little cautious with six out of nine expecting some retracement or for prices to be little changed.

Three called for prices to extend their gains from last week which would mean pushing further into $80 plus territory. A move with any conviction above $80 a barrel would mean a challenge of the early-January highs.

Bearish forecasters said oil prices near $80 did not reflect the fundamental picture which remains weak due to bloated fuel inventories and anemic demand.

"Now that oil is approaching $80 and near the top of its current channel, I would be leaning more towards 'bearish'," said Mike Sander of Sander Capital Advisors.

"The global economy is still weak, we have very high unemployment, and on going government bailouts. We have not turned the corner yet to being fiscally responsible."

RELATED LINKS

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* Fed's Move Is a Test of Markets: Roche
* Fed Raises Discount Rate
* Biggest Gas Guzzlers for 2010
* Track Oil and Commodities Prices
* Top Energy News

Will last week's decision by the Fed to raise the discount rate be a 'game-changer' for oil and commodities markets? The knee-jerk reaction suggested markets were perturbed by the prospect of the end of the 'easy money' conditions that accommodative policy has provided. Still, the Fed made it clear that the discount rate move does not mean the main Fed funds target rate will be hiked immediately and markets seemed to take the move in their stride.

"I'm definitely of the opinion that the sell-off and interest in U.S. dollars following the Fed announcement was overplayed," said Ben Westmore, Economist - Australia & Commodities at National Australia Bank.

"I don't expect the Fed Funds Rate to move until well into the second half of this year and I feel that Bernanke had already telegraphed removal of liquidity and increase in the discount rate."

Still, there's no ignoring the correlation of the commodities markets with the U.S. dollar. That's been brought into sharper relief in the wake of the Fed's discount rate hike and Eurozone sovereign debt woes. Stronger dollar stands to undermine commodities markets since a resurgent greenback makes U.S. dollar-denominated commodities more expensive for importers trading in euros, sterling or yen.

"Near-term movements are being influenced by the waxing and waning of the U.S. currency," said Gavin Wendt, senior resource analyst at Mine Life.

"Nevertheless, there is every chance that we will begin to see a slow and steady increase in demand for crude products, led by improving demand from emerging economies."

Commodity markets will be watching Fed chairman Ben Bernanke's semiannual economic testimony before Senate and House committees Wednesday and Thursday for clues on what to expect from the Fed after the discount rate hike.

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WORLD FOREX: Euro Hits 2-Week High Vs Yen On Asian Stock Gains

TOKYO (MarketWatch) -- The euro hit a two-week high against the yen in Asia on Monday, as upturns in Asian shares encouraged U.S. hedge funds to buy the risk-sensitive unit, dealers said, adding that the euro has more room to rise this week.

Market participants will now shift their focus onto whether U.S. economic fundamentals are improving, raising expectations that the Federal Reserve will gradually move toward a more normal monetary policy, dealers said.

In early Asian trading, the euro rose to Y125.24, its highest since Feb. 4, as Asian stock rises prompted U.S. hedge funds to accumulate euro holdings, triggering stop-loss orders around Y124.90 and pushing the dollar-yen higher, dealers said. The dollar climbed to a high of Y91.90.

As of 0450 GMT, the euro was at Y124.95, compared with Y124.64 in New York Friday, while the dollar was at Y91.64 from Y91.65.

"I have to admit that the dollar has shifted from a Y89.00-Y91.00 range to a Y90.00-Y92.50 band" after the Federal Reserve Board raised its discount rate by 25 basis points to 0.75% Friday, said Hiroshi Maeba, a senior dealer at Nomura Securities.

"Expectations are mounting that the Fed's timing to exit its current accommodative policy may become quicker than previously expected. Under this environment, it's safe to hold the dollar-yen," he said.

Japan's benchmark Nikkei 225 Stock Average index was up 2.55% as of 0450 GMT. Shares in Australian, South Korean and Hong Kong markets also strengthened.

The dollar may rise to Y92.50 and the euro to Y126.00 this week if U.S. economic data come in better than expected, adding to a brighter outlook for the U.S. economy, dealers said. The other key event is Fed Chairman Ben Bernanke's testimony in Washington on Wednesday and Thursday.

Upcoming data include the Case-Shiller home price index for December and Conference Board Consumer Confidence Index for February. Durable goods data for January will be released Thursday, while fourth-quarter gross domestic product data and existing home sales for January will come out Friday.

Meanwhile, the euro rose to $1.3639 from $1.3613 in New York late Friday as traders stepped up their risk-taking. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.435 from 80.611.

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Contrarian investor Marc Faber tells forum that Japan is 'neglected market'

TOKYO (MarketWatch) -- Japan Inc. got an endorsement from a seemingly unlikely character Monday, when one of the investment world's so-called 'Dr. Dooms' had positive words for the Japanese stock market.

"Here, there is an investment opportunity," said Marc Faber, the publisher of the "Gloom, Boom & Doom" report, who called Japan a "neglected market."

"Valuations are not terribly expensive," Faber said in a speech to the CLSA Japan Forum in Tokyo.
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Lt. Gen. Keith J. Stalder speaks to WSJ/Dow Jones Japan Editor Jake Schlesinger about why he thinks the Japanese should let the Marines stay, the threat of North Korea and his efforts to improve Japanese public perception of the base.

Faber did not elaborate on Japan in his speech, and did not take questions from the media. The slide presentation that accompanied his speech described Japan as "the perfect contrarian play," and simply added, "Banks!"

Faber's own Web site proclaims him as being "well known for his 'contrarian' investment approach," and the rest of his speech was true to the world view for which he is known.

Faber criticized the U.S. Federal Reserve's policy of slashing interest rates to spur the economy, saying that low rates only create new bubbles and boost "consumption at the expense of capital formation."

"It is very difficult to value anything when interest rates are zero," he said.

But in his concluding comments, Faber said that U.S. stocks are now "probably where they should be, given the zero interest rates."

In keeping with his "doom" theme, Faber's presentation also touched upon the possibility of a coming apocalyptic crisis, and how to best prepare for it.

"I'm a believer that the next war will be a dirty war," he said, using strategies such as poisoned water supplies and mobile-phone sabotage.

"If you want to prepare for war times, you have to own physical commodities," such as precious metals, diamonds and houses in the countryside, away from dangerous urban areas, he said.

Faber also recommended that investors buy agricultural commodities, such as wheat.

Investors will need to rethink their global asset allocation, he said in his conclusion on investment themes -- and should have at least half of their assets exposed to emerging economies in the future.

Asian healthcare was one of his specific recommendations, as markets aren't saturated and companies will benefit from growing and aging populations, he said.
'Final crisis'

A clutch of other economists -- including Nouriel Roubini -- have also been called "Dr. Doom," for their contrarian views.

"The original Dr. Doom was Henry Kaufman," Faber said, referring to the former Salomon Brothers Inc. executive, who also served as an economist at the Federal Reserve Bank of New York.

Kaufman earned his nickname because of his forecasts for Salomon in the 1980s calling for falling bond prices.

When it comes to his own predictions, Faber seems to revel in his doom-mongering moniker.

Some of the concluding slides in his presentation said he is still recommends long positions in gold and silver, and short positions in U.S. Treasury bonds.

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Bernanke, retailers hold key for stocks

NEW YORK (Reuters) - Wall Street could keep rallying after notching its best week this year if Federal Reserve Chairman Ben Bernanke gives a reassuring assessment of the recovery and retail earnings show improvement.

Investors are eager to hear more on the thinking behind the Fed's surprise move to raise its discount rate, especially because the Fed's loose monetary policy has provided a crucial spur to equities' advance since their March 2009 bottom.

While the rate rise suggested that the Fed now considers the financial sector to have healed sufficiently to warrant taking back extraordinary liquidity, the increase also sparked unease about a possible broader removal of economic stimuli.

Bernanke's semiannual testimony on monetary policy before congressional panels this week takes on an even more important dimension as investors look for clarity on the Fed's intentions and how Bernanke sees the recovery progressing.

"We will be watching for more confirmation of which track the Fed is on," said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey. "We will be looking for more color on the timing of the (exit strategy)."

The Fed has said its benchmark fed funds rate would remain exceptionally low for an extended period to sustain the recovery, but there has been little light on the timeline of its exit strategy and what risks might that entail, more so with a high U.S. unemployment rate still a big menace.

"Is (the rate increase) a reflection of its confidence in the stabilization of markets and the economic recovery, or are they very worried about inflation and therefore are hiking rates?" Praveen added.

RETAILERS IN THE BULL'S-EYE

Earnings from major retailers, including Home Depot Inc , Target Corp and Macy's Inc will also be in the spotlight, along with key economic data, including February consumer sentiment and January new home sales. For the full economic diary, see

Luxury home builder Toll Brothers , gold miner Newmont Mining Corp and grocer Safeway Inc are on the earnings scoreboard. For the full earnings diary, see

With consumer spending accounting for about two-thirds of U.S. economic activity, any indication that consumers are again spending should go a long way in reassuring investors about the outlook for profits and add to the prevailing optimism that has underpinned the stock market's rebound from the recent sell-off

.

Of the 422 S&P 500 companies that have reported earnings as of Friday, 72 percent have beaten analyst expectations, 10 percent have matched estimates and 18 pct have missed estimates, according to Thomson Reuters data.

That is well above the 61 percent that have beaten estimates in a typical quarter since Thomson Reuters began tracking data in 1994.

BIG BOUNCE

Optimism about the recovery has helped the benchmark S&P 500 trim its losses since its January 19 peak to 3.6 percent decline through Friday. The index fell as much as 8 percent through February 8.

Investors have been scouring for beaten-down shares in growth-oriented stocks such as commodities, technology and consumer discretionary sectors in the market's latest rebound, helping the S&P 500 score its biggest weekly advance since November last week.

For last week, the S&P 500 rose 3.1 percent, the Nasdaq gained 2.8 percent and Dow Jones industrial average climbed 3 percent.

"The reason stocks begin to work from here is that the data that came out of the fourth quarter was generally positive, visibility is improving and now we are starting to see that delinquencies are stabilizing," said Thomas Lee, chief U.S. equity strategist at J.P. Morgan in New York.

"The macro trends are all moving in the right direction."

Bernanke is scheduled to testify before the U.S. House of Representatives Financial Services Committee on Wednesday and the next day he is due to testify before the U.S. Senate Banking Committee.

In addition to Bernanke's comments, the direction of the stock market could turn on how much progress the European Union makes in its efforts to allay investors' fears about Greece's fiscal deficit problems and concerns about the stability of the euro.

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Nasdaq OMX Group acquires a majority stake in Agora-XNasdaq OMX Group pays $6.6M for a majority stake in Agora-X

Nasdaq OMX Group Inc. has paid $6.6 million to acquire a majority interest in Kansas City-based Agora-X LLC.

Agora-X is an electronic communications network for institutional trading in over-the-counter commodities contracts. It was founded in January 2008 with seed money from Kansas City-based FCStone Group Inc. Nasdaq OMX Group invested $7.5 million in the project in February 2008, acquiring a 20 percent stake and helping develop the electronic trading platform that went live in December 2008.

The Tuesday investment by Nasdaq OMX Group brings its stake in Agora-X to 85 percent and shrinks FCStone’s stake to 15 percent.

FCStone has an option to buy an additional 10 percent stake at fair market value. But New York City-based International Assets Holding Corp. (Nasdaq: IAAC), which acquired FCStone in October 2009, said in a release that because it no longer has a controlling financial interest, it plans to deconsolidate Agora-X as a subsidiary and recognize the gain in income during the first quarter.

Agora-X CEO Brent Weisenborn said he was excited about the expanded relationship with Nasdaq OMX Group.

“We’ve worked with Nasdaq OMX to create the technology for a best-in-class electronic marketplace, and now with their majority interest, it allows us to take advantage of immense synergies and access to all of the Nasdaq OMX resources,” he said in a release.

Agora-X will become a part of the Nasdaq OMX Commodities division.

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