Today's Headlines

Bloomberg:

- Pulte Homes Inc.(PHM) agreed to buy Centex Corp.(CTX) for $1.3 billion in an all-stock deal that creates the largest U.S. homebuilder by revenue and throws each of them a lifeline in the worst housing slump since the 1930s. Pulte agreed to pay 0.975 of a share for each Centex share, valuing Centex at $10.50, or 38 percent more than yesterday’s closing price, the Bloomfield Hills, Michigan-based company said today in a statement.

- Federal Reserve officials feared the U.S. economy might fall into a self-reinforcing cycle of rising unemployment and slumping business and consumer spending, making credit tighter in a weak financial system, minutes of the Federal Reserve’s March meeting show.

- Sales at U.S. wholesalers rose in February for the first time in eight months, contributing to a record drop in inventories that indicates distributors are well on the way to eliminating the glut in stockpiles. Sales rose 0.6 percent, the first increase since June, the Commerce Department said today in Washington. The 1.5 percent decrease in the value of stockpiles was the biggest since records started in 1992. At the current sales pace, it would take 1.31 months for distributors to deplete the amount of goods on hand, the lowest since November, compared with 1.34 months in January. Smaller inventories mean any stabilization in demand will translate into a pick up in orders and production. “Excess supply conditions don’t look as bad as they were,” said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. “This is encouraging because it’s not just happening in wholesaling, it’s happening in the factory sector, too.”

- The Federal Reserve may offer investors longer-term loans at higher interest rates to buy commercial mortgage-backed securities, aiming to protect the central bank’s balance sheet while acceding to an industry plea. Lobbyists in the commercial mortgage-backed securities industry say the Fed needs to provide loans of at least five years, rather than the current three-year limit, to avert a meltdown in the market. Fed officials, wary of granting the request outright, are considering a compromise in altering terms of its $1 trillion emergency-lending program.

- U.S. retailers’ online sales rose 11 percent on average in the first three months of the year, according to a survey by Forrester Research and Shop.org. Of 80 companies, 58 percent reported their sales increased during the first quarter from the same period a year ago, said Sucharita Mulpuru, an analyst at Cambridge, Massachusetts-based Forrester. “It seems that consumer confidence is getting better,” Mulpuru said yesterday in a telephone interview. “There is so much price competition out there that you can find great deals. Hopefully the worst is behind us.”

- Petroleos Mexicanos, the state oil company, may recover an extra 3 billion barrels from its Cantarell field, or 20 percent more than planned, by using a technology that extracts hard-to-reach crude.

- Crude oil rose for the first time in four days after a U.S. government report showed a smaller U.S. inventory gain than an industry report. Supplies gained 1.65 million barrels to 361.1 million last week, the highest since July 1993, the Energy Department said today. Stockpiles were forecast to climb by 1.5 million barrels, according to a Bloomberg News survey. The industry-funded American Petroleum Institute said late yesterday that stockpiles jumped 6.94 million barrels to the highest since 1990. “The inventory build today wasn’t anywhere near as large as in the API report, which is giving the market support,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “It’s hard to be too bullish with inventories approaching a record.”

- U.S. auto-parts maker shares rose after General Motors Corp. and Chrysler LLC said they will start administering $3.5 billion in federal aid aimed at helping their suppliers. GM will get $2 billion under the Treasury programs, which guarantee payments owed to parts suppliers, Dan Flores, a spokesman for the automaker, said today. Chrysler said in a statement that it will receive a $1.5 billion line of credit.

- Russian overdue bank loans are increasing by 20 percent a month, a pace that will bankrupt weak lenders as the financial crisis deepens, OAO Sberbank Chief Executive Officer German Gref said. Businesses and consumers are still struggling to repay loans, more than half a year after the crisis started, paving the way for a new round of problems, Gref, a former economy minister, said at a conference in Moscow today. “The crisis is just beginning for the banking industry,” said Gref, who has run Russia’s largest lender for 18 months. “The crisis will arrive from the real sector of the economy.”

- JPMorgan Chase & Co.(JPM), Goldman Sachs Group Inc.(GS) and the eight other banks that have dominated the credit-default swaps market for a decade are now ceding some power to their clients as regulators push for transparency. Pacific Investment Management Co., Elliott Management Corp. and three other investment firms will join 10 dealers this week on a committee that will make binding decisions for the first time on how contracts are settled. Such decisions have influenced payouts and, at times, had the potential to almost double the amount investors made or lost.

- The Massachusetts state pension system fired Jeremy Grantham’s firm as manager of $230 million in emerging-markets debt after losses from asset-backed securities dragged down returns.

- The U.S. Securities and Exchange Commission is weighing multiple rules to dictate when traders can bet shares will fall, after lawmakers and business groups said short-sellers fueled the financial crisis by targeting banks. One option the SEC staff proposed today is a measure similar to the so-called uptick rule, which House Financial Services Committee Chairman Barney Frank urged the agency to reinstate. The agency will also seek feedback from investors, brokerages and companies on a plan to temporarily ban short- selling of stocks that have fallen at least 10 percent.

- U.S. regulators sued Denver-area investment manager Shawn Merriman and his firm, claiming he ran a 15-year Ponzi scheme and spent proceeds on classic cars, motor homes and artworks by Rembrandt van Rijn.

Wall Street Journal:

- Williams-Sonoma Inc.(WSM), the US gourmet-cookware retailer, is repositioning its Pottery Barn unit to make its products more affordable, citing retail industry consultants and analysts.

- The president's new science adviser said Wednesday that global warming is so dire, the Obama administration is discussing radical technologies to cool Earth's air. John Holdren told the Associated Press in his first interview since being confirmed last month that the idea of geoengineering the climate is being discussed. One such extreme option includes shooting pollution particles into the upper atmosphere to reflect the sun's rays. Mr. Holdren said such an experimental measure would only be used as a last resort. "It's got to be looked at," he said. "We don't have the luxury of taking any approach off the table."

CNBC:

- The 30-year mortgage rate could fall to nearly 4 percent by the end of the year as both the economy and housing market make a slow recovery, Bank of America-Merrill Lynch said. "We expect that disinflationary forces combined with overt quantitative easing from the Federal Reserve will push the 30-year fixed rate mortgage down from the current 4.85% rate to 4.2% by year-end," the firm said in a note from Bank of America-Merrill Lynch economists Gary Bigg and David A. Rosenberg.

MarketWatch:
- Hedge funds gained roughly 1% in March, but lagged a sharp rebound in the stock market as some managers' short positions suffered, according to estimates released Wednesday by firms that track performance in the $1.5 trillion industry. Performance in March lagged the equity market. The Standard & Poor's 500 index surged 8.5% last month. Bonds also outperformed, with the Barclays Aggregate Bond Index advancing 3.3% in March, led by gains in U.S. Treasury bonds and high yield debt. "It was a challenging month for hedge funds," Charles Gradante, co-founder of Hennessee Group, said in a statement. "Equity markets rallied strongly, while the market fundamentals really did not change." Most funds missed out on the market rally because they had "tight net exposures," which means long positions were balanced closely with short positions, or negative bets, he said. "Managers were also hurt as the sectors they have been heavily short, such as financials, consumer discretionary and materials, were the sectors that rallied the strongest," Gradante added.

Chicago Sun-Times:

- A congressional ethics board has launched a preliminary inquiry into U.S. Rep. Jesse Jackson Jr. (D-Ill.), related to President Obama's vacant Senate seat and the corruption investigation of ousted Gov. Rod Blagojevich, the Chicago Sun-Times has learned.

NY Post:

- The stress tests the government are about to conduct on some of the nation's largest banks is being blasted by insiders at Sheila Bair's Federal Deposit Insurance Corp., who say it's a pointless exercise that's more sizzle than steak. The FDIC's basic beef with the stress test is that it is not a credible way to assess how much additional cash beaten-down banks will need to weather what many Wall Street experts predict will be more losses in the coming months. The tests are conducted by the Treasury Department and the Federal Reserve on the nation's 19 biggest banks, including behemoths Citigroup, Bank of America and JPMorgan Chase. "It's a sham," one source told The Post, describing the test as an "open-book, take-home exam" that doesn't actually work.

The Business Insider:

- Lights At The End Of The Economy Tunnel. There are indeed some signs that the worst might be over for the economy. Which is why the violent rally in the stock market isn't obviously a sucker's rally.

MoneyControl.com

- Mary Ann Bartels, Chief Market and Technical Analyst of Merrill Lynch, said hedge funds are facing redemption pressure as investors prefer cash. According to her, there is a need to watch Q2CY09 to get clear picture of redemptions in 2009. She further stated that not all hedge funds are facing net loss and some are receiving funds. There has been recent buying in S&P futures to hedge shorts in financial sector, she added. She said gold is overowned and may see deeper fall if hedge funds book profits.

Seeking Alpha:

- Short Sellers Get the Squeeze. Part of this article in the Wall Street Journal is about the steps taken to "take back" land from the short sellers; that is not the part I am concerned with. What I simply hate(d) as an investor in mid cap and some small cap stocks was the complete lack of attention the SEC paid to naked short selling. Short selling on its own is a positive; but naked short selling (selling shares that don't even exist) is essentially a fraud. The reality is many of the big players whose prime broker were the Merrill Lynchs (MER), Goldman Sachs (GS), Lehman Brothers of the world - engaged in this. When pressed on this, the brokerages (and their institutional buddies) insisted its an overblown issue... certainly very rarely did a hedgie sit day after day shooting against a defenseless small cap stock as its personal plaything. Nope - all in your imagination folks.

Reuters:
- Any further output cuts by OPEC, coupled with an expected increase in vessels in 2009, may dampen the oil tanker companies' ability to hold on to higher freight rates, denting their earnings potential in the coming quarters. OPEC (Organization of the Petroleum Exporting Countries) oil supply fell in March, for the seventh consecutive month, but remained above its target as some members pumped more than agreed levels, a recent Reuters survey showed.

Financial Times:
- China's planned Rmb850bn ($124bn) revamp of its ailing healthcare system will generate software spending worth at least $1.5bn, according to IBM's Chinese development laboratory. The US computer group said it expected that at least 1,000 hospitals would spend at least $1.5m each to set up electronic medical records under the plan, which is expected to be set out in detail by Chinese government officials today. "This will trigger $1.5bn in software spending from hospitals," said Matt Wang, vice-president of IBM's China Development Lab. "That is a low ballpark figure. I expect it will be much more than that."

- The oil price in gold terms has been stable over history but not recently – from the top of the oil bubble last year until the start of gold’s correction a few weeks ago, oil fell by some 77 per cent relative to gold. Platinum, a precious metal that should have a lot in common with gold, dropped 55 per cent in gold terms from its recent peak, while copper, an industrial metal, fell 66 per cent. All remain significantly cheaper in gold terms than they were at the outset of the financial crisis almost two years ago. This suggests that the gold price had raced ahead of itself as investors looked for insurance during the crisis and also suggests that the correction could go further.