MORNING COFFEE

China Raises Interest Rates. China unexpectedly raised a key interbank interest rate for the first time in five months. The move comes a day after the People's Bank of China hinted economic growth was no longer its only goal and it would focus on managing inflation expectations as well.

FOMC Worried About Housing.  According to minutes released yesterday from the most recent FOMC meeting, members agreed unanimously on key points but some participants expressed concern the housing market would be hurt as the government winds down its purchases of mortgage-backed securities. Members agreed that underlying inflation is subdued and will remain so for some time, but views were split on the two-year outlook; some members felt inflation could be too low for employment/price stability targets, while others worried about upside risk.

Fed Tells AIG To Hide Payoff.  The New York Fed, led at the time by Tim Geithner, told AIG (AIG) to hide details about its payments to banks, e-mails show. In a draft of a regulatory filing, AIG disclosed it paid banks, including Goldman Sachs (GS) and Societe Generale (SCGLY), 100 cents on the dollar ($62.1 billion) for credit-default swaps they bought from the firm. But the New York Fed crossed out the reference, and AIG ultimately excluded the detail from its Dec 24, 2008 filing.

A batch of generally encouraging December same-store sales reports from the retailers provided a supportive influence ahead of the claims report. Macy's (M), TJX Cos. (TJX), Limited (LTD), American Eagle (AEO), and Gymboree (GYMB) all increased their earnings guidance in conjunction with their same-store sales updates.

The initial claims report was released this morning.  Claims for the week ending Jan. 2 were up just 1,000 to 434,000, which was very close to the consensus estimate of 439,000.  Continuing claims, meanwhile, dropped 179,000 to 4.802 million for the week ended Dec. 26.  That was well ahead of the consensus estimate of 4.975 million.  

Lennar (LEN) released earnings this morning of $0.19 which beat estimates by $0.67, on revenue of $914M

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