MORNING COFFEE

Fed Loses On Real Estate. The Federal Reserve is holding paper losses on the real estate portfolio it acquired when it helped JPMorgan (JPM) buy Bear Stearns. When the Fed acquired the assets, they had a face value of $8.4 billion with an estimated worth of $7.7 billion.  As of September, the assets had been marked down to only $4 billion.

New App War. Twenty-four telecom operators have joined forces to challenge Apple's (AAPL) successful App Store. The alliance, which includes AT&T (T), Verizon (VZ) and Sprint (S), plans to build an open platform that will deliver applications to all mobile phone users.

Foreclosures will continue.  Two new studies have been released on the U.S. housing market and the outlook is bad. Both studies conclude that persistent waves of foreclosures in parts of the U.S. will put downward pressure on home prices over the next several years and that mortgage modification efforts will delay, but not prevent, home foreclosures. One study projects that of the 7.7 million households behind on their mortgage payments, 5 million will lose their houses through foreclosure.

Banks Filled With Cash.  U.S. banks have been criticized for being too reckless with their lending in the past and too stingy currently; have been sitting on as much as $1.29 trillion in cash, equal to a record 98 cents for every dollar of existing business loans. Among the three biggest U.S. banks, the one with the highest ratio of cash to corporate loans is Citigroup (C).

Citigroup’s (C) $193 billion in cash and deposits with other banks as of Dec. 31 stood at $1.15 for each dollar of existing corporate loans, which totaled $167 billion.

JPMorgan Chase & Co. (JPM) ranked second and showed a ratio of $1.08 as of September, the date of its most recent report to the Securities and Exchange Commission of its commercial loan totals.

Bank of America (BAC), was third, cash and deposits at other banks tripled to $0.64, or $146 billion for each dollar of commercial loans.

Kraft (KFT): Reported Q4 EPS of $0.48 beating earnings estimates by +$0.03, on revenue of $11 billion. 

Merck (MRK): Reported Q4 EPS of $0.79 in-line with estimates on revenue of $10 billion.

Teva Pharmaceutical (TEVA): Reported Q4 EPS of $0.94 which missed estimates by -$0.01 on revenue of $3.8 billion.

Upgrades

Intel (INTL): Auriga U.S.A upgraded their rating from Hold to Buy and changed their target price from $20.00 to $24.00.

Target (TGT): UBS upgraded their rating from Neutral to Buy.

Downgrades

ConocoPhillips (COP): Bernstein lowered their rating from Outperform to Market Perform and lowered their target price from $62.00 to $54.00.

Coverage Reiterated/Price Target Changed

NII Holdings (NIHD): Stifel Nicolaus reiterated their Buy rating and changed their target price from $50.00 to $60.00.

·         Futures: Dow +0.32% to 10149. S&P +0.41% to 1084. Nasdaq +0.48%. Crude flat at $79.66. Gold -0.26% to $1170.90.

·         Asia, Nikkei +0.2% to 10034. Hang Seng -0.1% to 20269. Shanghai +1.1% to 3018. BSE +1.2% to 16227.

·         Europe at midday, London +0.9% to 5213. Paris +0.6% to 3630. Frankfurt +0.9% to 5560.