Thursday morning headlines

Merrill Lynch's medicine: Everybody expected a bad number, so the $9.8 billion fourth-quarter loss wasn't that much of a surprise (though scary nonetheless). It's the largest quarterly loss in the firm's 93-year-history, the result of the disastrous subprime mortgage market ($14 billion in writedowns on top of $7.9 billion in write-downs in the third quarter). Keep in mind that Merrill has been raising money from outside so that might help cushion the blow. (Bloomberg)

Stimulating the economy: Fed Chairman Ben Bernanke supports some sort of fiscal stimulus package - so long as it can be quickly implemented and encourages increased consumer and business spending. Seems that everyone in Washington is jumping on the stimulus bandwagon, even if it's coming a little late (some economists believe we're already in a recession and even in a best case scenario the benefits of any economic package won't be felt for some months down the road). Wall Street is not encouraged (let's not forget home construction plunged 14 percent in December, falling to its lowest point since 1991). The Dow is down about 100 points at last check. (NYT)

What recession?: LAT columnist Tom Petruno offers some badly needed perspective on the state of the economy - and specifically the market's manic reaction to all the bad news.

Despite the slowdown in business and consumer activity in recent months, there is no consensus that the economy is heading for a recession, usually defined as a contraction lasting at least six months. In its latest report on regional trends in the economy, the Fed said Wednesday that the expansion continued in late November and December, albeit "at a slower pace." In a Bloomberg News survey early this month, 62 economists projected on average that the economy would grow at a 1.5% annual rate in the first half of this year, less than half the pace of recent years but still positive. And there has been some good news for the economy amid the slowdown. For example, 30-year mortgage rates have dropped below 6% to the lowest level in more than two years, a boon for many people hoping to take advantage of falling home prices.

Countrywide adjusts terms: The big mortgage lender - soon to be taken over by Bank of America – last year modified loan terms to allow more than 80,000 mortgage borrowers to remain in their homes. Lenders are sometimes better off accepting lower monthly payments than going through the foreclosure process. Countrywide also had several thousand cases last year in which the borrower sells the home for less than the loan balance and the lender agrees not to demand the remaining amount due. (WSJ)

Directors deal imminent: Several insiders are saying that a contract agreement with the networks and studios could come this week. Meanwhile, Variety reports that a number of top writers have been telling their agents that they would consider going financial core (returning to work but remaining guild members) if the Writers Guild leadership doesn't make a serious effort to get back to the bargaining table.

There are jitters about how a Directors Guild deal will be received by rank-and-file writers. WGA members have been fired up by the strike battle, but beyond the fiery rhetoric of the leadership, there's a powerful contingent of moderates in the guild who are eager to get back to work. The WGA's negotiating committee is populated with very successful screenwriters and showrunners who all have gigs to go back to, and their voices will be significant in assessing the merits of any DGA pact.

Lots of action at Sundance: With no end in sight to the writers’ strike, the studios are on the prowl for movies that could fill out their schedules this year and next - and that's driving up prices. From the NYT:

This year the ineffably anointed include “Choke” (a film adaptation of Chuck Palahniuk’s novel, with Sam Rockwell and Anjelica Huston), “The Wackness” (a comedy about a high-school-age marijuana dealer trading drugs for therapy), “Sunshine Cleaning” (with Emily Blunt and Amy Adams playing crime-scene cleaners), “The Great Buck Howard” (about a law-school dropout who becomes the personal assistant to a mentalist played by John Malkovich), “Pretty Bird” (a comedy about inventors who are building a rocket belt, with Paul Giamatti), “Mysteries of Pittsburgh” (based on the novel by Michael Chabon) and “Hamlet II” (about a high school drama teacher writing a sequel to Hamlet to motivate his students and save his department).

Rolling Stones heading to Live Nation?: The geriatric rockers are nearing the end of their contract with Capitol Music and according to the NY Post are shopping for a new deal. L.A.-based Live Nation, which last year struck a 10-year, $120 million pact with Madonna, is one possibility, according to the Post, as is Universal Music. One complication: if the Stones walk away from EMI, they will leave behind the rights to songs produced after 1971.

Port traffic dips: Not much, but considering the stupendous growth at the Ports of Los Angeles and Long Beach these past few years, any decline is significant. Soft consumer spending, the weakening value of the U.S. dollar and soaring fuel costs are the main culprits. The numbers would have been far worse were it not for a jump in exports (thank the dollar for that). Despite the slowdown, growth at the ports is expected to resume over the next decade. (Daily Breeze)

Big-time recusal: When a man who worked on military planes at a Lockheed Martin plant sued for injuries that he suffered as a result of exposure to toxic chemicals, and later appealed, the California Supreme Court turned it down because four of the seven justices held stock in oil companies that provided some of the chemicals at issue in the case. "It’s a crazy — and unacceptable — way to run a court," blogs the NYT editorial board. "The justices should be required to put their financial holdings in a blind trust. Instead, California requires judges to follow their investments so they can recuse themselves in cases where there is a conflict."

Rupert thoughts on WSJ: He's apparently rethinking his plan to make WSJ.com an entirely free site, telling bureau chiefs at a dinner in NY that the changeover is not as simple as he first thought (his original notion was that increased ad revenue would offset the loss of subscription dollars). Also, Murdoch said that front-page feature stories are too long and might be better suited for the weekend. “There’s definitely concern that the longer special pieces at The Journal are going to be reined in,” Josh Prager, a Journal reporter, told the NY Observer.

Hoot of the day: Sam Zell sent out a note to his "partners" at the new Tribune as he introduced a slimmed-down and at times irreverent employee handbook. "It reminds us not to take ourselves too seriously, and to have fun," he writes. Er, the LAT not taking itself too seriously? Now that would be a tunaround story for the ages.