Strong Out of the Gate

Morning News of Note:

• LEND,CFC,WM,WFC,NEW: Risky Mortgages Might Receive Tighter RegulationFederal financial regulators proposed new controls to limit mass marketing of mortgage loans that let borrowers minimize initial monthly payments. Regulators, in guidance issued yesterday, urged mortgage lenders to tighten requirements for borrowers to qualify for so-called payment option adjustable-rate mortgages. The mortgages come with teaser rates as low as 1% and give borrowers several choices each month, including the possibility of paying less than the interest due. Regulators raised concerns about the default risks of these complex loans to financial institutions and whether borrowers truly understand them. Borrowers risk having monthly mortgage payments suddenly double. (Full Story) WSJ
• ERTS,ATVI: Game Maker Cuts Forecast as Industry Seems in Slide...Electronic Arts, a bellwether company among video game makers, reported on Tuesday that its holiday sales would be "well below" earlier projections, the latest sign of a sharp slide in performance for the industry. .. (Full Story) NY Times
• GM: GM Shares Sink To 23-Year Low As Woes Mount Company May Be Dethroned As Biggest Maker of Autos; Bidders Emerge for GMAC...Pressure grew on General Motors Corp., with its shares falling to a 23-year low yesterday as rival Toyota Motor Corp. said it would boost production, potentially surpassing GM as the world's biggest auto maker. Separately, Las Vegas investor Kirk Kerkorian's Tracinda Corp. disclosed it had sold some of its GM holdings for tax purposes, but the move left open the possibility that Mr. Kerkorian could rebuild his GM stake in the future. (Full Story) WSJ
• KBH,TOL,RYL,HOV: New-Home Building Increases, But Doubts Emerge on Outlook...New-home construction rose more than expected in November, but some economists say the gains were largely tied to orders placed during the summer. The Commerce Department said housing starts increased 5.3% to a seasonally adjusted annual rate of 2.123 million units last month, the largest increase since April. October starts, originally reported at 2.014 million, declined 6.6% to 2.017 million from September's 2.160 million rate. Yesterday's report also showed that permits for future building rose 2.5% last month to a 2.155 million annual rate. (Full Story) WSJ
• BAC,MWD,LEH,BSC,JEF: Fidelity, Deutsche Bank reach commissions deal...Fidelity Investments has struck a deal with Deutsche Bank AG's securities arm on Wall Street to pay separately for the firm's stock research and trading. The move -- a change from the practice of paying for both services together -- could put pressure on other Wall Street firms to do the same. The Fidelity move is meant to battle the practice of paying for research with inflated stock-trading commissions that can reduce investor returns. The two firms confirmed they have struck a deal, the second of its kind since October. Financial details weren't released. A Fidelity spokesman said the mutual-fund company is holding talks with a number of other brokers "to discuss the potential for such an arrangement." (Full Story) WSJ

Market Comments: The market opened very strong this morning. 3Q GDP was revised down to a still strong +4.1%. You know I prefer to see market strength come at the end of the day, but after 4 consecutive down days, lets see if the market can hang on to these gains.

ERTS warned last night that its earnings would be below guidance. The stock took a hit after-hours, but is trading higher this morning. Go figure. Most sectors look higher, with the exception of the homebuilders.

long WFC