Late-Night Headlines
Bloomberg:
- Intel Corp.(INTC) Chief Executive Officer Paul Otellini said orders this quarter are “a little better than expected,” signaling that the computer industry may start to recover from its worst slump since 2001. “A lot depends on June,” Otellini said today at a meeting at the company’s headquarters in Santa Clara, California. “So far so good.” Intel climbed 44 cents, or 2.9 percent, to $15.65 in late trading. The stock, up 3.8 percent this year, closed at $15.21 on the Nasdaq Stock Market. While corporations have put off replacing their PCs, demand from consumers “has held up reasonably well,” Sean Maloney, head of Intel’s sales and marketing, said today. Intel sees an opportunity to sell more server chips as companies replace older machines, he said. There is no “unhealthy” buildup of unsold parts, Maloney said. “We are at some kind of a new base -- we’ve seen things stabilize,” he said. “We’ve seen a return to confidence in some areas.”
- The cost of protecting investors in Asia-Pacific corporate and government bonds from default tumbled, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 20 basis points to 212.54 as of 8:24 am in Singapore Japan index was quoted 5 basis points lower at 245 as of 9:24 am in Tokyo Australia index was quoted 17.5 basis points lower at 227.5 as of 10:28 am in Sydney
- Republicans seized on an Obama administration document that says regulation of greenhouse gases by the Environmental Protection Agency is likely to cause economic harm to small businesses, communities and factories. Senator John Barrasso, a Wyoming Republican, cited the nine-page memo at a committee hearing today on the EPA’s proposed 2010 budget, saying it shows the agency’s finding in April that the gases are harmful to health was flawed. The document is a “smoking gun” that proves the decision was politically based, he said. The memo, part of an internal interagency review process that began in March, said EPA regulation of greenhouse gases under the Clean Air Act “is likely to have serious economic consequences for regulated entities throughout the U.S. economy.” It said there is concern the EPA “is making a finding based on ‘harm’ from substances that have no demonstrated direct health effects.” Republicans and Democrats on the Senate panel clashed today over the economic costs of climate-change legislation, a precursor to debate when the committee attempts to draft such a measure. “There exists no legitimate economic argument that regulating carbon dioxide would not significantly increase the cost of energy,” Senator David Vitter, a Louisiana Republican, said at the Senate committee’s hearing.
- Neelie Kroes, the European Union’s top antitrust enforcer, is seeking to fine Intel Corp.(INTC) more than 1 billion euros ($1.36 billion) for using rebates to thwart a competitor, a person with direct knowledge of the case said.
- Freddie Mac is seeking a $6.1 billion investment from the U.S. Treasury, a fifth of the aid tapped in March, as the mortgage-finance company used an accounting rule and gains on derivatives to help curtail losses. Freddie Mac said it will still need more financial help from the government and may have trouble coming up with the cash to pay dividends owed on Treasury funds already borrowed.
- A record 128,600 investment professionals have enrolled to take the Chartered Financial Analyst exam in June, angling to gain a hiring edge as the financial-services industry sheds jobs.
- The Homeland Security Department plans a new emphasis on finding and deporting illegal immigrants convicted of crimes, Secretary Janet Napolitano told a House panel. Testifying before the House Appropriations homeland security subcommittee today, Napolitano said her department’s proposed budget for the fiscal year beginning Oct. 1 includes $39 million to hire 80 new law enforcement employees to pursue criminals who are in the U.S. illegally. She said the department is working with state and local authorities to begin deportation proceedings for prisoners shortly before they end incarceration.
- China’s industrial production grew less than economists estimated in April as electricity output fell and exports tumbled. Retail sales climbed. Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. “The recovery is still quite fragile -- exports are still very weak,” said Isaac Meng,” a senior economist at BNP Paribas SA in Beijing. A decline in power output accelerated to 3.5 percent in April from 1.3 percent in March, the statistics bureau said. “If inventory stockpiling and the refiring of production has been premature, production is at risk of falling in coming months,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong.
Wall Street Journal:
- Goldman Takes Heat for Conflicts at Whitehall. One of Goldman Sachs Group Inc.'s(GS) premier real-estate funds is in discussions with its lender to restructure debt on some of its biggest investments: Nevada casinos, German office buildings and a U.S. hotel chain. The wrinkle: The lender is Goldman Sachs. Investors were warned about potential conflicts of interest when they put money into this group of real-estate vehicles, which use the Whitehall name. Such funds were billed as "opportunity funds," huge, highly leveraged investments backed directly by Goldman, its employees and a group of outside investors. Overall, Goldman has raised $31 billion for various Whitehall funds over the past 18 years, with outsiders usually investing two-thirds or more into each one. With commercial real-estate values plunging, investors and their advisers have begun focusing on the conflicts. They say that Goldman is able to use its position as investor, lender and fee-collector to benefit itself at the expense of outsiders. For Whitehall's biggest fund, Whitehall Street Global Real Estate Limited Partnership 2007, the news has been almost all bad. In 2008, it wrote down $2.1 billion of the $3.7 billion invested between May 2007 and August 2008. But all wasn't lost for Goldman. During 2008, Goldman made at least $88 million in fees for arranging financing for Whitehall 2007 deals, plus an additional $30 million in advisory fees, and $19 million in property-management fees, according to documents for the first, second and fourth quarters of the year that were reviewed by The Wall Street Journal. In addition, the Goldman fund charges a 0.5% management fee on the gross cost of the fund's investments, which was $17.2 billion as of Dec. 31. Assets under management change quarterly, but assuming a static value of $17.2 billion for 2008, that would have earned Goldman an additional fee of $86 million. Such high fees at a time of poor performance have upset some outside investors in the fund. Adding to the discord, says one such investor: Goldman offered to buy out its employees' interest in the fund at a discount to net asset value late last year, weeks before further marking down the equity value of the fund. Outside investors didn't get the offer and suffered the markdown. Goldman is in an especially tricky position when acting as both a borrower and lender to itself, critics say. Concessions granted by Whitehall may benefit Goldman, the lender, at the expense of Whitehall investors, the critics add.
- China is likely to surpass the U.S. to become world’s largest online game market this year, according to a recent report by market research firm iResearch. China’s online game market generated revenue of 20.8 billion yuan ($3.04 billion) in 2008, up 52.2% over the previous year. Over 80% of the revenue came from big, multiplayer online games, with the rest generated from Web games and mobile games.
- House Energy and Commerce Chairman Henry A. Waxman has signaled that he may accept further compromises to his bill to curb U.S. greenhouse-gas emissions as the Obama administration and congressional Democrats face stepped-up attacks from Republicans on the politically sensitive proposal. Mr. Waxman (D., Calif.) told representatives of the Sierra Club, the Environmental Defense Fund and the National Wildlife Federation in a meeting late Monday that he is considering amending the bill to require a cut in U.S. greenhouse-gas emissions of roughly 14% to 17% below 2005 levels by 2020 rather than a cut of 20% in that time frame, as the public version of his proposal calls for, according to three people who were briefed on the discussion but didn't attend the meeting. Republicans pounced Tuesday on a White House document that says regulating greenhouse gases under the Clean Air Act "is likely to have serious economic consequences for regulated entities throughout the U.S. economy, including small businesses and small communities." The document, an amalgamation of comments by government agencies sent from the Office of Management and Budget to the Environmental Protection Agency earlier this year, presents a more dire view of the consequences of regulating greenhouse gases under the Clean Air Act than the Obama administration has publicly stated.
- Amid the worst falloff in consumer spending in decades and a sharp decline in its own results, retailer Macy's Inc.(M) is chasing customers of fallen competitors to rebuild its sales.
- The Treasury Department is expected to notify a group of asset managers Wednesday that they've been culled from the 104 that applied to oversee the first wave of Public-Private Investment Program funds. The selected firms, widely expected to include mega-managers BlackRock Inc. and the Pacific Investment Management Co., will then negotiate with Treasury over the structure of their proposed funds before they're formally identified as qualified under PPIP, expected in early June, according to a Treasury official.
- The swine-flu outbreak has focused a spotlight on a looming risk for hospitals and their patients: a shortage of technicians to run critical lab tests. Vanderbilt University Hospital's lab had to pull staffers from other parts of the hospital and ask technicians to work double shifts to test incoming patients for swine flu earlier this month. "It was all hands on deck for a week," says Michael Laposata, chief pathologist at the large medical center in Nashville, Tenn. Swine flu has had minimal impact in the U.S. so far. But in the event of a major infectious-disease outbreak, labs at smaller hospitals around the country "would never have enough expertise or resources to mount a response," Dr. Laposata says. "This is a major patient-safety issue, right behind taking out the wrong kidney or giving 10 times the dose of a drug."
- Companies are rushing to raise money at the most frenzied pace in years and they are finding eager investors, a sign that markets are beginning to heal themselves. It is a startling shift. For much of the past year, even the largest companies found it difficult, if not impossible, to raise fresh money. Investors were more keen to safekeep their cash than to hand it over. Some companies had to drain their financial reserves or, sometimes, even close down, accelerating the global downturn. Now, the floodgates are wide open.
- Voting is drawing to a close Wednesday in India's largest election ever, and a slowing economy, terrorism and the rural poor have been front and center in the campaign. But of growing concern are the country's teeming new megacities, which are swelling rapidly even as jobs dry up and funding for infrastructure disappears.
- Google Inc.(GOOG) Tuesday said it would add a new menu to its search-results page to help users refine results by a broader range of variables. It also announced an online service that compiles search results into a spreadsheet.
NY Times:
- To go out in a small boat along Singapore’s coast now is to feel like a mouse tiptoeing through an endless herd of slumbering elephants. One of the largest fleets of ships ever gathered idles here just outside one of the world’s busiest ports, marooned by the receding tide of global trade. There may be tentative signs of economic recovery in spots around the globe, but few here. Hundreds of cargo ships — some up to 300,000 tons, with many weighing more than the entire 130-ship Spanish Armada — seem to perch on top of the water rather than in it, their red rudders and bulbous noses, submerged when the vessels are loaded, sticking a dozen feet out of the water. So many ships have congregated here — 735, according to AIS Live tracking service of Lloyd’s Register-Fairplay Research, a ship tracking service based in London — that shipping lines are becoming concerned about near misses and collisions in one of the world’s most congested waterways, the Strait of Malacca, which separates Malaysia and Singapore from Indonesia.
- About $12 billion was pulled out of accounts at Bernard L. Madoff’s firm in 2008, according to several people briefed on an analysis of Mr. Madoff’s business records. About $6 billion, or half, was taken out in just the three months before the financier was arrested in December and charged with operating an extensive Ponzi scheme, these people said. Those figures offer a bit of hope for Mr. Madoff’s thousands of defrauded customers.
- Nearly three months after President Obama approved a $787 billion economic stimulus package, intended to create or save jobs, the federal government has paid out less than 6 percent of the money, largely in the form of social service payments to states.
Business Week: Here is the case for a price bubble: Oil inventories are at a 19-year high; the U.S. alone has some 1 billion barrels sitting in storage tanks, according to Mark Williams at the Associated Press. Demand for oil is set to fall to its lowest level in five years, says the U.S. Energy Information Administration. Over at the Oil Drum, Rune Likvern says up to 3 million barrels a day of oil is being bought purely for storage, including on the sea. But he predicts that such purchases – which help to prop up prices – will decline because storage is becoming harder and harder to find; when they do, Likvern says, prices will fall substantially.
- China Looms Large in India’s Election .
LATimes:
- A federal jury in Miami convicted five men today of plotting with Al Qaeda to topple Chicago's Sears Tower and bomb FBI offices in hopes of igniting an anti-government insurrection. A sixth man was acquitted. The verdict allows government prosecutors to claim overall victory in a case that dragged on for years and cost millions of dollars, resulting in two hung juries and the acquittal of a seventh man originally charged in the case. According to prosecutors, the men, led by Batiste, wanted to bring down the U.S. government and sought an alliance with the Al Qaeda terrorist network to carry out attacks. Batiste recruited the other defendants as "soldiers" in his terrorist army, prosecutors said. The group's aims included blowing up the 110-story Sears Tower, poisoning salt shakers in restaurants and launching terrorist attacks "just as good or greater than 9/11," prosecutors said.
- Allegiant Air’s(ALGT) prudent ways help it soar amid slump in travel. The little known Las Vegas carrier is the nation’s most profitable; first-quarter profits rose nearly 200% to $28.2 million on revenues of $142.1 million. And that’s despite teaser fares as low as $9.
Fox News:
- Some lawmakers are questioning the wisdom of releasing hundreds of photos potentially showing U.S. military personnel abusing prisoners in Iraq and Afghanistan in the aftermath of the Sept. 11 terrorist attacks on New York City and the Pentagon. "If we release the pictures, the odds are that Al Qaeda and other terrorist groups will then use our pictures to recruit people to come into the war against us," Sen. Joe Lieberman. I-Conn., told FOX News. The Pentagon plans to release the photos by May 28 in response to a Freedom of Information Act lawsuit filed by the American Civil Liberties Union. A recent military study found a troubling connection. The study, based on the interrogation of 48 detainees, concluded that a motivating factor for bombers was the humiliation of Muslims, depicted in the photos shown repeatedly in the Arab media and on the Internet. The head of the American Legion warned in the Wall Street Journal that "a picture may be worth a thousand words, but is it worth the death of a single American soldier?...The Defense Department owes it to the soldiers to appeal to the U.S. Supreme Court in order to block the release of these photos." Lieberman told FOX News the release of the photos is not about transparency because the photos are old and Congress has moved aggressively to prevent abuse in the future through the Detainee Treatment Act. "This is voyeurism," he said. "There's no value to these pictures and again, tremendous potential harm to American and a lot of Americans, particularly those who are good enough to serve us in uniform."
Politico:
- The CIA has long been on the receiving end of harsh rebukes from Congress — on intelligence failures leading up to the war in Iraq, on secret prisons abroad and on the harsh interrogation techniques used on terrorism suspects. But with the release of records showing that it briefed members of Congress along the way, the CIA has effectively put lawmakers on the defensive. The 10-page document, which was prepared after an April 20 request by Rep. Peter Hoekstra (R-Mich.), lists 40 instances in which the CIA briefed members of Congress between September 2002 and March 2009. But they provide a vague description of the briefings, giving just enough information to fuel claims that House Speaker Nancy Pelosi (D-Calif.) and other top officials have long known about waterboarding and other tactics but did little to stop the techniques from being used. Sen. Orrin Hatch (R-Utah), the longest-serving member of the Intelligence Committee, said that if Pelosi or other Democrats objected to the interrogation techniques when they were briefed on them, they could have offered legislation — or withheld appropriations for the program. “We’re not without power up here,” Hatch said. “Now, they can make a fuss on policy differences, but to try and besmirch the people who had these tough decisions to make during those trying times is really offensive to people like me.” Asked if he felt the relevant lawmakers were kept informed of the interrogation tactics, Sen. Pat Roberts of Kansas, who was the top Republican on the Intelligence Committee, offered what he called “a strong, affirmative yes.”
Business Standard:
- India’s exports have declined for the seventh consecutive month in April. Quick estimates available with the commerce ministry reveal that the country’s exports dipped by 33 per cent to $10.7 billion. Similarly, imports too contracted by 35 per cent to $16 billion in April 2009, as against $16.07 billion in the year-ago period.
Late Buy/Sell Recommendations
Citigroup:
- Upgraded (HD) to Buy, target $32.
Night Trading
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Earnings of Note
Company/EPS Estimate
- (DPS)/.29
- (TDW)/1.96
- (LIZ)/-.22
- (CLWR)/-.34
- (CA)/.29
- (ASEI))/1.04
- (JACK)/.44
- (WFMI)/.19
Economic Releases
8:30 am EST
- The Import Price Index for April is estimated to rise .6% versus a .5% gain in March.
- Advance Retail Sales for April are estimated unch. versus a -1.2% decline in March.
- Retail Sales Less Autos for April are estimated to rise .2% versus a -1.0% decline in March.
10:00 am EST
- Business Inventories for March are estimated to decline -1.1% versus a -1.3% decline in February.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000,000 barrels versus a +605,000 barrel increase the prior week. Gasoline supplies are expected unch. versus a -167,000 decline the prior week. Distillate inventories are estimated to rise by +1,250,000 barrels versus a +2,428,000 barrel gain the prior week. Finally, Refinery Utilization is expected to rise by +.4% versus a +2.65% increase the prior week.
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Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.
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