MORNING COFFEE

Mass Votes In Republican.  In a major upset Scott Brown won a Senate seat in Massachusetts yesterday, putting into question President Obama's healthcare plan. Shares of healthcare stocks rose yesterday on anticipation of a Republican win.  Strategist say the election of a Republican to a traditionally Democratic state is a further sign that Americans do not like the direction that the current administration is taking the country.

FHA Tries To Stay Afloat.  The Federal Housing Administration announced stricter lending requirements and higher borrowing fees today.  The move is meant to shore up the agency's tanking finances and prevent the need for a taxpayer bailout. The FHA's reserves to cover losses have fallen to 0.5% or $3.6 billion of the $685 billion in loans outstanding. A year ago, its reserves stood at 3%, and Congress requires the FHA to maintain a 2% capital-reserve ratio.

Buffett Opposes Bank Levy. Warren Buffett said today that he opposes President Obama’s proposed levy on financial institutions because firms including Goldman Sachs (GS) and Wells Fargo (WFC) already repaid bailout funds.

“It just doesn’t make any sense to me,” said Buffett, whose Berkshire is an investor in Wells Fargo and Goldman Sachs. “What was done in the Fall of 2008 was to save the American economy. It wasn’t to save the banks.”

President Obama announced a plan last week to impose a fee on as many as 50 major financial companies to cover as much as $117 billion in losses from the federal government’s TARP program. The levy would apply to firms with more than $50 billion in assets including Bank of America (BAC) JPMorgan Chase (JPM) and Citigroup (C). The levy would not be applied to General Motors, Chrysler and other companies that also received TARP funds, but have not repaid the government.

“A tax that is enacted with the idea that a certain amount of vengeance will be achieved, I don’t think that will be a good idea,” said Buffett.

Unemployment To Remain High.  A report from a group of U.S. mayors suggests that while unemployment will likely peak in most U.S. cities this year, it will take many years before the jobless rate returns to the lows experienced last decade. In some areas, unemployment will stay at or above 10% through 2013, but "what is just as alarming as the double-digit unemployment in many of the nation's major metro areas is the lethargic rate at which it will recede once the job market turns around."

Economic reports to be released today are: Building Permits, Housing Starts, and the PPI numbers.

Earning Releases:

IBM (IBM): reported Q4 EPS of $3.59 beating estimates by +$0.12 on revenue of $27.2 billion.  The company also said it expects full-year EPS of at least $11.00 vs. $10.88.

Bank of America (BAC): reported a much larger than expected loss.  The company announced Q4 EPS of -$0.60 missing estimates by -$0.07 on revenue of $25.4 billion. Shares are down -1.1% in the premarket.

Bank of NY Mellon (BK): announced Q4 EPS of $0.59 beating street estimates by +$0.08 on revenue of $3.3 billion.

·         Futures: Dow -0.4%. S&P -0.5%. Nasdaq -0.6%. Crude -1.4% to $77.91. Gold -0.6% to $1,133.

·         Asia, Nikkei -0.25% to 10,738. Hang Seng -1.8% to 21,286. Shanghai-2.9% to 3,152. BSE -0.1% to 17,474.

·         Europe at midday, London -0.6%. Paris -0.7%. Frankfurt -0.4%.